Definition
SAB 121 is an SEC Staff Accounting Bulletin issued in 2022 that required SEC-reporting entities custodying crypto-assets on behalf of others to recognize both a liability and a corresponding asset on their balance sheets equal to the fair value of the custodied assets. The rule materially affected the economics of bank custody for crypto, limiting the capability of regulated financial institutions to offer digital asset custody at scale. SAB 121 was rescinded in early 2025 following legislative and regulatory pushback, but the episode shaped institutional custody architectures and made custody-integration patterns a first-class procurement concern.
Example
Under SAB 121, a bank custodying $1 billion of client crypto had to reflect $1 billion of both liability and asset on its balance sheet, which under capital rules effectively required the bank to hold capital against the custodied assets. The rescission removed that gross-up requirement and reopened bank custody economics.
How Liquid Mercury Handles This
Liquid Mercury integrates with institutional custodians (Fireblocks, BitGo, Anchorage, Copper) whose custody architectures were designed to be compliant under shifting regulatory regimes, so platform users inherit the custody choices rather than rebuild them.