This decision, announced shortly after the resignation of former SEC Chair Gary Gensler, is being hailed as a major victory for the crypto industry and a significant shift in regulatory attitudes under the new Trump administration.
Introduced in 2022, SAB 121 imposed stringent capital requirements on banks holding crypto assets, significantly raising operational costs and regulatory risks for offering crypto custody services. For Wall Street institutions, the rule acted as a deterrent, limiting their involvement in the burgeoning crypto market. Banks were largely restricted to offering crypto-related derivatives and exchange-traded funds (ETFs) to wealth management clients, leaving Bitcoin custody services off the table.
Former SEC Chair Gary Gensler defended SAB 121 as a necessary measure to protect investors during potential crypto firm bankruptcies. However, critics argued that the rule stifled innovation and discouraged broader institutional adoption of crypto assets.
A New Era for Crypto on Wall Street
The revocation of SAB 121 comes after years of lobbying by the crypto industry and bipartisan support in Congress for overturning the rule. Previous efforts to repeal SAB 121 were blocked by former President Joe Biden, who vetoed proposed legislation in 2023.
Under the Trump administration, however, the regulatory environment for crypto has shifted dramatically. The SEC’s decision to eliminate SAB 121 aligns with the administration’s broader pro-crypto policies, which aim to foster innovation and encourage U.S. financial institutions to embrace decentralized digital currencies.
SEC Commissioner Hester Peirce, a long-time advocate for clearer and more supportive crypto regulations, celebrated the announcement:
“Bye, bye SAB 121! It’s not been fun,” Peirce wrote on X.
Peirce has also been tapped to lead a new SEC “crypto task force” focused on creating a comprehensive regulatory framework for crypto assets.
Wall Street Reacts
Major U.S. financial institutions are already signaling interest in expanding their crypto offerings. At the World Economic Forum in Davos, Goldman Sachs CEO David Solomon expressed optimism about revisiting the bank’s stance on Bitcoin ownership, stating,
“From a regulatory perspective, the bank couldn’t own Bitcoin before, but we’ll certainly revisit the issue now that the rules have changed.”
CEOs from Morgan Stanley and Bank of America also hinted at the possibility of integrating more robust digital asset offerings into their services, emphasizing how the administration’s pro-crypto policies are reshaping the financial landscape.
Implications for the Future
The revocation of SAB 121 represents a watershed moment for Wall Street’s involvement in crypto. By lowering the financial and regulatory barriers, the SEC’s decision paves the way for U.S. banks to expand their crypto offerings and strengthen their foothold in a market poised for significant growth.
While some concerns remain about investor protections and systemic risks, the removal of SAB 121 is a clear signal that the Trump administration is serious about fostering innovation and positioning the U.S. as a global leader in crypto adoption.
As Wall Street reevaluates its relationship with crypto, the financial industry is likely to witness a surge in institutional participation, further legitimizing digital assets and bringing them closer to mainstream acceptance.