An odd thing happened when Coinbase reported its quarterly financial results last week. The bulk of its assets and liabilities abruptly disappeared. The cryptocurrency exchange had shown $291 billion of assets as of Sept. 30. At year-end, they were $23 billion. Total liabilities, once $282 billion a few months earlier, dropped to $12 billion.

The off-balance-sheet treatment suggests the customers do, rather than Coinbase. But Coinbase in its latest disclosures to investors still says the issue isn’t clearly resolved. If Coinbase went bankrupt, the bitcoins and other tokens held on behalf of customers could be considered the property of the bankruptcy estate, and such customers could be treated as unsecured creditors. After some crypto trading platforms failed in 2022 and 2023, bankruptcy judges indeed ruled that many of the customers were unsecured creditors and that the crypto assets being stored belonged to the companies’ bankruptcy estates.

Providing custodial services for crypto assets involves maintaining the cryptographic keys needed to access them. In that respect, crypto assets have similarities to bearer shares, where whoever possesses them essentially owns them.

The rescission of SAB 121 could attract more competition from banks and broker-dealers, although they would need approval from other regulators. Some already have a head-start. Bank of New York Mellon was among the financial institutions that received exemptions from SAB 121 last year, after the SEC determined their services for safeguarding crypto assets would provide the same protection as their custodial services for other assets.