Specifically deubiquitinates histone H2B at 'Lys-120' (H2BK120Ub). H2BK120Ub is a specific tag for epigenetic transcriptional activation and acts as a regulator of mRNA splicing. Deubiquitination is required for efficient cotranscriptional splicing of a large set of exons (By similarity). Thiol-dependent hydrolysis of ester, thioester, amide, peptide and isopeptide bonds formed by the C-terminal Gly of ubiquitin (a 76-residue protein attached to proteins as an intracellular targeting signal). Component of a complex with RUVBL1 and PSMC5. Belongs to the peptidase C19 family.