According to Bloomberg, interest groups including the Bank Policy Institute, the American Bankers Association, the Securities Industry and Financial Markets Association, and the Financial Services Forum have submitted documents to the US Securities and Exchange Commission (SEC) in hopes of modifying existing guidelines.
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Banks Call for Amendment to Cryptocurrency Regulation
Exclusion of Cryptocurrency Calculation Principles
Exemption for Lending Institutions (Cryptocurrency as Collateral)
SEC Blocks the Way, Banks Unable to Ride the Bitcoin ETF Wave
Analyst: Clearly Unfair to Banks
Banks Call for Amendment to Cryptocurrency Regulation
Existing regulations have increased the costs for US banks to custody digital assets for their clients, and due to certain regulatory barriers, banks are unable to enter the cryptocurrency custody business.
Their requests include:
Exclusion of Cryptocurrency Calculation Principles
Traditional assets (such as tokenized deposits) recorded or transferred using blockchain technology should not be considered as cryptocurrency.
Underlying tokens (BTC) of SEC-approved products (such as spot Bitcoin ETFs) should not be considered as cryptocurrency.
Exemption for Lending Institutions (Cryptocurrency as Collateral)
Regulated lending institutions should not have to count the cryptocurrency they hold as liabilities, but they still need to disclose their activities related to cryptocurrency in financial statements.
The trade associations stated in their letter:
If banks are prohibited from offering digital asset custody services on a large scale, the situation for investors, clients, and the financial system will worsen.
SEC Blocks the Way, Banks Unable to Ride the Bitcoin ETF Wave
Banks are mainly targeting SEC’s Staff Accounting Bulletin No. 121, which has been resisted by banks since its release in 2022. Lending institutions state that this bulletin limits their ability to expand their cryptocurrency custody services due to high compliance costs.
The letter also mentions the recent popularity of Bitcoin ETFs, with most issuers choosing custody services such as Coinbase, BitGo, Gemini, or Fidelity, causing banks to miss out on opportunities.
Earlier this month, Republican Congressman Mike Flood and Democratic Congressman Wiley Nickel introduced a resolution to repeal SEC guidance, stating that the SEC has overstepped its authority. Republican Senator Cynthia Lummis has also initiated similar legislation in the Senate. Mike Flood recently stated in an interview:
SEC should not be making rules that affect bank custody services.
The US Government Accountability Office also raised questions about the SEC last year.
Analyst: Clearly Unfair to Banks
Bloomberg ETF analyst Eric Balchunas also commented on this news, stating:
US banks have given up a crucial role in Bitcoin ETFs, and the Bank Trade Alliance has written to the SEC, asking them to exclude ETFs from the broader cryptocurrency protection umbrella. I wouldn’t blame them for wanting a piece of the pie; it’s unfair to banks.
According to insiders, the Republican-led House Financial Services Committee may vote to repeal the SEC guidance as early as this month.
SEC
Bitcoin ETF
Staff Accounting Bulletin No. 121
Banks
Further reading
FSC reiterates plans to introduce regulations for “regulated virtual asset trading platform operators” in September this year, strengthening anti-fraud capabilities
Buffett Interview: Bank failures are not over, but depositors will be fine, no need to worry about the overall system.