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SAB-122: How the SEC Unblocked Bank Crypto Custody

Staff Accounting Bulletin 122 (23 January 2025) rescinded SAB 121's on-balance-sheet treatment. US banks can now custody customer crypto under standard custody accounting.

Draft published May 2026 · pending editorial review · not legal, tax, or accounting advice

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Reviewed by Stephan Kulik · Last updated: · How we rank

⚠ Not legal, tax, or accounting advice

This page summarises publicly-available SEC, OCC, and Federal Reserve guidance for reference. It is general information, not legal, tax, or accounting advice, and is not a substitute for consultation with a qualified US securities lawyer, accountant, or prudential-regulation specialist. Primary sources: SEC SAB-122 text and OCC Interpretive Letter 1183.

Short answer

SAB-122 (23 January 2025) rescinded SAB 121 (April 2022), which had required US banks and other SEC registrants to record customer crypto holdings as both an asset AND a liability on their own balance sheets. The original rule made bank crypto custody prohibitively expensive for regulatory-capital purposes. SAB-122 restores standard custody accounting — the same treatment used for fiat and securities custody — which removes the regulatory-capital penalty and clears the path for BNY Mellon, State Street, Northern Trust, US Bancorp, and others to offer institutional crypto custody competitively against non-bank custodians like Coinbase Custody and Fidelity Digital Assets. Paired with OCC Interpretive Letter 1183 (same week) confirming national banks may custody crypto without prior supervisory non-objection.

The SAB 121 problem (2022-2024)

Staff Accounting Bulletin 121 was issued by the SEC\'s Office of the Chief Accountant in March / April 2022 (publication date 11 April 2022 in the Federal Register). Its operative paragraph required that an entity custodying crypto-assets for customers recognise:

  1. A liability on its balance sheet equal to the fair value of the customer crypto-assets held, reflecting "the obligation to safeguard the crypto-assets held for its platform users"; AND
  2. A corresponding asset of equal value, reflecting the safeguarding right.

For a bank, this dual on-balance-sheet recognition had cascading regulatory consequences. The asset side counted against:

  • Risk-Weighted Asset (RWA) calculations under Basel III, with crypto typically receiving a 1,250% risk weight under the Basel Committee\'s final standard for crypto-asset exposures (i.e., equivalent to fully unbacked equity exposure)
  • Tier 1 capital requirements — the bank had to hold capital against the on-balance-sheet asset
  • Supplementary Leverage Ratio calculations — the asset added to the leverage-exposure denominator

The practical effect was that $1B of customer-custody crypto could absorb $20-50M+ of bank regulatory capital depending on the Basel calibration applied. For comparison, fiat custody of $1B absorbs essentially zero regulatory capital because customer deposits and securities custody arrangements are not recognised as bank assets in the same way.

SAB 121 was therefore widely viewed as making US banks economically unable to compete with non-bank custodians (Coinbase Custody, Fidelity Digital Assets, BitGo Trust, Anchorage) for institutional crypto custody. Several major banks (BNY Mellon, State Street, US Bancorp) had prepared crypto custody products in 2022-2023 but held them back from launch citing the SAB 121 capital penalty.

The 2024 political pressure

SAB 121 attracted bipartisan congressional pushback. In May 2024, the House and Senate both passed H.J. Res. 109 (under the Congressional Review Act) which would have invalidated SAB 121; President Biden vetoed it on 31 May 2024. The November 2024 election shifted the political balance and during the Trump transition (December 2024-January 2025), incoming SEC chair Paul Atkins signaled the SAB would be rescinded.

What SAB-122 actually does

SAB-122 was issued on 23 January 2025 by the SEC\'s Office of the Chief Accountant. Its operative provisions:

  1. Rescinds SAB 121 in its entirety. The on-balance-sheet asset + liability recognition for customer-custody crypto is no longer required.
  2. Restores standard custody-accounting treatment. Registrants treating customer crypto as a custody arrangement record disclosure information only (per existing ASC 326 contingent-loss + ASC 450 frameworks where applicable). No on-balance-sheet inflation.
  3. Effective immediately for periods ending after 23 January 2025. Prior- period restatements are permitted but not required.

Parallel OCC + Federal Reserve changes

SAB-122 alone removes only the accounting penalty. Two further January 2025 federal-level actions were needed for US banks to actually offer crypto custody at scale:

  • OCC Interpretive Letter 1183 (January 2025) confirmed that national banks may custody crypto-assets and engage in stablecoin activities WITHOUT requiring prior supervisory non-objection from the OCC. This reversed an Acting Comptroller letter from March 2023 that had required pre-clearance.
  • Federal Reserve and FDIC have signalled coordinated supervisory treatment via SR letters and ongoing examinations, but as of mid-2026 have not issued formal final guidance equivalent to OCC IL 1183 for state-member or FDIC-supervised institutions.

Who benefits — in practice

Several categories of US banks and bank-adjacent operators are positioned to offer meaningful crypto custody in the SAB-122 environment:

  • Trust banks (BNY Mellon, State Street, Northern Trust) — already custody institutional assets; crypto custody is a product-line extension. BNY Mellon accelerated its Digital Asset Custody product post-SAB-122. State Street announced launch intent during 2025.
  • Money-centre banks (JPMorgan, Bank of America, Citi) — broader institutional client base; have prepared crypto-custody products with varying degrees of production-readiness. Citi has been most public about institutional digital-asset custody ambitions.
  • Custody-bank specialists (US Bancorp, Wells Fargo) — custody is core revenue; same dynamics.
  • OCC NTBC-chartered crypto-natives (Anchorage Digital) — already operating under a national trust bank charter with crypto-native infrastructure; the SAB 121 / 122 issue affected them but they had structured around it. Now the accounting symmetry is restored with traditional bank competitors.
  • State-chartered crypto trust banks (Kraken Bank, Avanti, etc.) — operate under Wyoming SPDI or similar state charters; less directly affected by SAB 121, but the symmetric environment benefits everyone.

What this does NOT change

  • Deposit insurance: FDIC coverage applies to fiat deposits up to $250,000 per depositor per insured bank. Crypto custody is NOT covered by FDIC. SAB-122 clears an accounting penalty, not a deposit-insurance gap.
  • Customer-asset segregation: independent of the accounting question. Custody arrangements still require segregation of customer assets from bank balance-sheet assets — that\'s a different operational/legal requirement, not an accounting one.
  • 1099-DA reporting: separate 2026 IRS broker-reporting regime under IRC §6045. Affects every US-domiciled crypto broker including bank custodians, but unrelated to SAB-122 mechanics.
  • State-level licensing: NYDFS BitLicense, state money-transmitter licences, etc. still apply.

The competitive impact

Before SAB-122, the institutional US crypto custody market was dominated by non-bank custodians (Coinbase Custody, Fidelity Digital Assets, BitGo Trust) plus the OCC NTBC- chartered crypto-natives (Anchorage, Kraken Bank). Post-SAB-122, traditional trust banks are entering the same market. The likely 2026-2027 dynamics:

  • Bank custodians win on institutional trust + existing customer relationships. Pension funds, sovereign wealth funds, large family offices that already custody with BNY Mellon or State Street are likely to onboard crypto with their existing custodian.
  • Crypto-native custodians retain advantages on operational depth + protocol coverage. A bank custodian custodying BTC + ETH is one thing; supporting 50+ chains + staking + governance participation is operationally far more complex, and crypto-native operators are years ahead.
  • Fee compression across the market as bank custodians enter with traditional-finance pricing models.
  • Stablecoin custody and reserves servicing becomes a competitive product line for trust banks — this is the most-likely first-wave bank product as it is operationally simplest and aligns with existing money-market-fund infrastructure.

Cross-references

Related US-specific content on this site:

Primary sources

Disclaimer

This guide is general information, not legal, tax, or accounting advice. SEC, OCC, and Federal Reserve guidance on bank crypto custody continues to evolve through 2026. Any institution-specific decision should involve qualified securities counsel, a CPA familiar with custody accounting, and a prudential-regulation specialist. See terms.

Frequently asked questions

What is SAB-122? +
SAB-122 is SEC Staff Accounting Bulletin No. 122, issued by the Office of the Chief Accountant on 23 January 2025. It rescinded SAB 121 (issued April 2022) and restored historical accounting treatment for entities that custody crypto-assets on behalf of customers. The key effect: US banks and other SEC registrants no longer have to record customer crypto holdings as both an asset AND a liability on their own balance sheets — they can instead use the standard custody-accounting treatment that applies to fiat custody and securities custody.
What did SAB 121 originally require, and why was it controversial? +
SAB 121 required public companies (including banks) that custody crypto-assets for customers to recognise BOTH (1) an on-balance-sheet liability equal to the fair value of customer crypto held in custody AND (2) a corresponding asset of equal value. The effect was that custodying $1B of customer crypto inflated the custodian's balance sheet by $2B in matched lines. For banks, this directly affected regulatory capital ratios: the asset side counted against risk-weighted-asset calculations and Tier 1 capital requirements, making customer crypto custody prohibitively expensive vs. fiat or securities custody. SAB 121 was widely criticised as making banks economically unable to compete with non-bank custodians (Coinbase, Anchorage) for the customer crypto custody market.
What changes operationally with SAB-122? +
Under SAB-122, registrants treating customer crypto as a custody arrangement record only disclosure information (per existing ASC 326 / ASC 450 contingent-loss frameworks where applicable). The on-balance-sheet $1B + $1B inflation goes away. This removes the regulatory-capital penalty for bank-custodied customer crypto and aligns crypto custody with the accounting treatment of other custody products. Operationally, banks can now offer crypto custody to customers without the punitive capital cost, which is the prerequisite for serving institutional crypto customers at scale via a bank entity rather than a separate trust company.
Which banks benefit from SAB-122? +
Any US bank or bank-affiliated entity that custodies (or wants to custody) customer crypto. In practice: BNY Mellon (which had been preparing a digital-asset custody product for years and accelerated post-SAB-122), State Street, Northern Trust, Citi, Bank of America, JPMorgan, US Bancorp, and the smaller bank-chartered digital-asset operators like Anchorage Digital (OCC NTBC) and Kraken Bank. Pre-existing non-bank crypto custodians (Coinbase Custody, Fidelity Digital Assets) were not directly affected by SAB 121 / SAB-122 because they were not SEC registrants subject to the bulletin, but they now face increased competition from bank custodians.
Does SAB-122 apply to non-bank crypto custodians or stablecoin issuers? +
SAB-122 applies to SEC registrants — entities that file with the SEC under the Securities Act and Exchange Act. That captures public banks, public broker-dealers, and any private entity that has publicly-registered securities. It does NOT directly apply to private non-bank custodians (Coinbase Custody is a US-domiciled trust company under NY Department of Financial Services; Fidelity Digital Assets is similarly structured). It does NOT directly cover stablecoin issuers unless they are SEC registrants. The bulletin's direct scope is narrower than the broader market commentary suggests, but the indirect effect is large because it removes a major distortion that had been pushing US institutional crypto custody to non-bank rails.
What is the broader context? +
SAB-122 is part of a sequence of January 2025 federal-level changes loosening crypto-custody constraints on US banks. The OCC simultaneously issued Interpretive Letter 1183 (January 2025), confirming that national banks may custody crypto-assets and engage in stablecoin activities without additional supervisory non-objection (reversing an Acting Comptroller letter from 2023 that had required prior supervisory consultation). Together, SAB-122 + OCC IL 1183 + the broader 2025 IRS broker reporting clarifications create the regulatory environment for US banks to offer institutional crypto custody competitively. The Federal Reserve has not directly addressed bank crypto custody in 2025 but has signaled coordinated supervision via SR letters; state-level frameworks (NYDFS BitLicense, Wyoming SPDI charter) remain operative.
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