The US Securities and Exchange Commission (SEC) has agreed to ease requirements for the accounting of digital assets on the balance sheets of financial institutions for certain participants in the cryptocurrency industry.

The SEC will allow a limited number of banks and brokerage firms to bypass the requirements of the SAB 121 when conducting transactions in the cryptocurrency market. The regulator did not say which US financial institutions may qualify for preferential treatment in relation to the provisions of SAB 121.

Under a bespoke agreement with the regulator, financial institutions will not reflect cryptocurrencies as liabilities on their balance sheets, but will be required to ensure that their clients’ digital assets are protected in the event of bankruptcy or insolvency. In addition, financial institutions will be required to demonstrate that they have implemented sufficient security measures to address the legal risks associated with the digital asset industry.

Let us recall that the SAB 121 amendments adopted by the SEC about two years ago oblige banks to reflect crypto assets on their balance sheets as depository liabilities when providing custody services, which requires the credit and financial institution to ensure 100% reserve and disclose information about risks. Many crypto market participants consider this excessive interference from the SEC.

In May, members of the House and Senate voted for a resolution to repeal the SEC amendment, but the lawmakers’ move was vetoed by U.S. President Joe Biden.