SEC Backpedals on Crypto Accounting: 'Never Mind' on Custody Rules
Published Date: 1/30/2025
Rule
Summary
The SEC just pulled back its previous advice on how companies should handle crypto-assets they hold for users. This change affects businesses dealing with crypto on their platforms and takes effect right away on January 30, 2025. It means companies might need to rethink how they report these digital assets, but no new costs or deadlines were announced.
Analyzed Economic Effects
3 provisions identified: 0 benefits, 2 costs, 1 mixed.
Retrospective restatement requirement
Companies must apply the rescission on a fully retrospective basis in annual periods beginning after December 15, 2024. Entities may choose to apply the rescission earlier in any interim or annual financial statement period included in filings with the Commission after the SAB's effective date.
SEC rescinds crypto custody guidance
The SEC withdrew prior guidance (Topic 5.FF) about accounting for crypto-assets you hold for platform users. As of January 30, 2025, an entity that safeguards crypto-assets must decide whether to recognize a liability and, if so, measure it by applying FASB ASC Subtopic 450-20 (Loss Contingencies) or IAS 37 (Provisions, Contingent Liabilities and Contingent Assets).
New disclosure expectations for crypto custodians
The staff requires entities to include clear disclosure of the effects when they first apply this rescission. The staff also reminds entities to continue meeting existing disclosure requirements such as Items 101, 105, and 303 of Regulation S-K and relevant FASB ASC topics.
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