Davis Polk associate Justin Levine was quoted in The Information discussing the SEC’s accounting guidance, known as Staff Accounting Bulletin No. 121 (SAB 121), which is one example of the broader regulatory challenges stifling Wall Street firms’ ability to offer crypto trading. The guidance requires firms that custody digital assets on behalf of customers, including broker-dealers, to record a liability on their balance sheets equal to the value of the custodied crypto assets.

“SAB 121 makes it nearly economically impossible for broker-dealers to custody crypto assets for customers,” said Justin.

Justin noted that the SEC under the incoming administration is likely to withdraw the accounting guidance, which it could do as soon as January 20, 2025.

“Morgan Stanley’s E-Trade Explores Offering Crypto Trading,” The Information (January 2, 2025) (subscription required)

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