Major U.S. banks and financial institutions are urging the U.S. Securities and Exchange Commission (SEC) to revise its definition of crypto-assets, aiming to expand their role within the crypto sphere. This would potentially enable them to serve as custodians for cryptocurrencies and recently approved spot Bitcoin exchange-traded funds (ETFs).
A coalition of trade groups, including the Bank Policy Institute, the American Bankers Association, the Financial Services Forum, and the Securities Industry and Financial Markets Association, articulated their stance in a letter addressed to SEC Chairman Gary Gensler on February 14. They underscored the recent approval of spot Bitcoin exchange-traded products in the U.S., highlighting that traditional banking institutions have not been involved as asset custodians in these approved products, unlike in most other ETFs.
The letter specifically calls for a reconsideration of Staff Accounting Bulletin 121 (SAB 121), issued by the SEC in March 2022, which offers guidance on the accounting for crypto-asset custody obligations. The trade groups argue that since the issuance of this guidance, significant developments have occurred, including the approval of a spot Bitcoin ETF. Current guidance obliges banks to hold crypto assets on their balance sheets, posing financial burdens and impeding their ability to provide crypto custody services efficiently.
To alleviate these challenges, the trade groups advocate for narrowing the definition of crypto-assets outlined in SAB 121 to exclude traditional assets recorded on blockchains. By doing so, assets like tokenized deposits would be exempt from stringent cryptocurrency guidance. Additionally, they propose exempting banks from on-balance sheet requirements while maintaining disclosure obligations, enabling them to engage in certain cryptocurrency activities transparently.
Notable figures in the industry have commented on banks' increasing interest in digital finance, with Bitwise chief investment officer Matt Hougan suggesting that banks are eager to join the "digital finance" wave. Bloomberg ETF analyst Eric Balchunas noted that Bank of America's move to push for SEC guidance adjustments reflects a shift away from its previous stance on Bitcoin ETFs. Meanwhile, TheBitcoin Therapist highlighted the frustration among bankers unable to offer spot Bitcoin ETFs to their clients, attributing it to the growing FOMO (fear of missing out) in the first quarter.
