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Bitcoin at $50K – Here’s how U.S banks want to get in on the action

3min Read

A coalition of U.S. banks have reached out to the SEC, requesting a tweak in the existing crypto-regulations. A tough call awaits…

crypto in the USA

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  • U.S. banks have requested the SEC to tweak crypto-regulations under SAB 121
  • Their appeal seeks more adaptable regulations to facilitate banks’ involvement in digital asset markets

A coalition of major U.S. banks has sent a letter to the Securities and Exchange Commission (SEC) on Wednesday, urging a re-evaluation of the current accounting guidance for holding digital assets. This, on the back of Bitcoin crossing the $50K mark and spot Bitcoin ETFs recording impressive figures over the last few weeks. 

The present guidance, also known as Staff Accounting Bulletin No. 121 (SAB 121), issued by the SEC in March 2021, mandates that public companies holding digital assets on behalf of clients or others must account for these assets as liabilities on their balance sheets. 

Highlighting the issues in the existing directive

This directive has increased the capital requirements for banks engaging in crypto-custody services. As a result, banks find themselves at a crossroads, facing challenges that prevent them from tapping into the crypto-market. A trade group coalition, which includes names like the Bank Policy Institute, the American Bankers Association, the Financial Services Forum, and more, has officially sent the letter to the SEC.

They contend that the current approach is excessively conservative, effectively making it prohibitively expensive for banks to hold digital assets. Therefore, it limits their ability to serve clients interested in this space.

U.S banks are looking to board the crypto-train

In the letter, the banks’ coalition shed light on the upcoming two-year anniversary of the directive, stating,

“As the two-year anniversary of the issuance of SAB 121 approaches, the Associations believe now would be an appropriate time to examine and discuss the implications of SAB 121 for regulated banking organizations.”

The banking groups have put forward two key requests for the SEC’s consideration. Firstly, they seek a refined classification of digital assets that would exclude traditional assets managed via blockchain, like tokens tied to products such as spot-Bitcoin ETFs, from the broad definition of crypto assets.

Secondly, they propose that regulated financial institutions be relieved from the obligation of listing digital asset holdings as liabilities on their balance sheets. This aims to ease the capital burden on banks involved in digital asset services.

Congressmen call for a repeal

A revision of the SEC’s accounting guidance in favor of the banks’ position could catalyze a more robust and regulated engagement of traditional financial institutions with digital assets. Conversely, if the SEC maintains its current position, it could reinforce the barriers to entry for banks in the crypto-custody space.

This bulletin has also garnered political attention. Several congressmen from the Republican and Democratic parties are looking to repeal the SAB 121, stating that the SEC has overstepped its regulatory boundaries.

Additionally, in an interview with Bloomberg, Mike Flood, a Republican representative from Nebraska, stated,

“The SEC should not be making rules that affect bank custody. That’s a job for our prudential regulators.”

A glimmer of hope from the investors

As the dialogue between the banking sector and regulatory authorities continues, the evolution of this regulatory framework will be closely watched by stakeholders across the financial ecosystem. In fact, many investors think that the banks’ demands are fair.

Eric Balchunas, a senior ETF analyst at Bloomberg, recently tweeted in favor of the coalition’s appeal.

He said,

“They (the US banks) want a piece of the action. I don’t blame them, it isn’t fair.”

There is a possibility the SEC will be open to adapting its policies in response to the rapid evolution of crypto and its integration with mainstream financial services.

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Prakriti is a Content Writer at AMBCrypto. She describes herself as a passionately creative individual, with a dash of strategic prowess. With over 3.5 years of experience in the field of content writing and marketing, she is dedicated to churning out top-notch content in domains like Crypto, Web 3.0, AI and contributing to quench the thirst for technical knowledge of her readers.
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