What this ASU does

ASU 2025-02 formally incorporates SEC Staff Accounting Bulletin (SAB) No. 122 into the FASB Accounting Standards Codification. The update addresses a gap in existing guidance by establishing requirements for entities that safeguard crypto-assets on behalf of platform users. The ASU removes the prior SAB Topic 5.FF guidance and replaces it with clarified accounting treatment that requires entities holding crypto-assets for third parties to recognize a liability reflecting their obligation to safeguard those assets. This change responds to the growth in crypto-asset platforms and the unique technological, legal, and regulatory risks these arrangements present.

Key provisions

• Liability recognition required: Entities must recognize a liability on the balance sheet when responsible for safeguarding crypto-assets held for platform users, including maintaining cryptographic key information necessary to access the assets (ASC 405-10-S99-1).

• Fair value measurement: The safeguarding liability must be measured at fair value of the crypto-assets held at both initial recognition and each reporting date, reflecting the entity's loss exposure from significant risks associated with custody.

• Scope specificity: Guidance applies when an entity maintains cryptographic key information for platform users' crypto-assets, regardless of whether the cryptographic key remains in the user's name or the entity's name.

• Risk-based approach: The liability captures technological risks (asset security and market volatility), legal risks (uncertain treatment in adverse events like fraud or bankruptcy), and regulatory risks (limited regulatory oversight compared to traditional asset safeguarding arrangements).

• No impact on other matters: The SAB expresses no view on applicability of federal securities laws or other federal, state, or foreign regulatory provisions related to crypto-asset activities.

Effective date

ASU 2025-02 was issued in March 2025. The document does not specify an explicit effective date or transition method within the provided text. Entities should consult the full ASU or FASB guidance for adoption timing and any early adoption provisions.

Who is affected

This ASU primarily affects:

• Crypto-asset exchanges and trading platforms that provide custody services to users
• Digital asset custodians and service providers holding crypto-assets on behalf of clients
• Financial institutions expanding into crypto-asset safeguarding services
• Public and private companies offering platform-based crypto-asset transaction capabilities

SEC registrants and entities subject to SEC reporting requirements are most directly impacted, as this amends SEC-specific guidance in the Codification.

What preparers should do

1. Assess platform arrangements: Finance teams should identify all crypto-asset safeguarding obligations currently in place or contemplated, documenting which assets the entity controls through cryptographic keys and the corresponding platform user rights.

1. Establish fair value measurement processes: Implement or enhance procedures to measure safeguarding liabilities at fair value each reporting period, considering the market price and quantity of crypto-assets held. Document assumptions and methodologies used.

1. Review disclosures and controls: Evaluate existing financial statement disclosures to ensure adequate transparency regarding the technological, legal, and regulatory risks inherent in crypto-asset custody. Strengthen internal controls around asset security and cryptographic key management.