SEC Blocks the Money Path? Banks Miss Out on Bitcoin ETF Craze, Industry Players and Legislators Call for Legislative Amendments
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 U.S. Securities and Exchange Commission (SEC) requesting amendments to existing guidance.
Contents:
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Banks call for changes in cryptocurrency regulation
Exclusion of cryptocurrency calculation principles
Exemption for lending institutions (cryptocurrency used as collateral)
SEC blocks the path, banks miss out on the Bitcoin ETF frenzy
Analyst: Clearly unfair to banks
Banks call for changes in cryptocurrency regulation
Existing regulations have increased costs for U.S. banks that act as custodians for digital assets, 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 recorded or transferred using blockchain technology (such as tokenized deposits) should not be counted as cryptocurrency.
Underlying tokens (BTC) of SEC-approved products (such as physically-backed Bitcoin ETFs) should not be counted as cryptocurrency.
Exemption for lending institutions (cryptocurrency used as collateral)
Regulated lending institutions should not count the cryptocurrency they hold as liabilities, but they still need to disclose their cryptocurrency-related activities in financial statements.
The trade alliance stated in the letter:
If banks are prohibited from providing digital asset custody services on a large scale, the situation for investors, customers, and the financial system will worsen.
SEC blocks the path, banks miss out on the Bitcoin ETF frenzy
Banks are primarily targeting SEC’s Staff Accounting Bulletin No. 121, which has been resisted by banks since its release in 2022. Lending institutions state that the bulletin limits their ability to expand cryptocurrency custody services, mainly due to high compliance costs.
The letter also mentioned the recent popularity of Bitcoin ETFs, with most issuers choosing custodial 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 abolish the SEC’s guidance, stating that the SEC has exceeded its authority. Republican Senator Cynthia Lummis also initiated similar legislation in the Senate. Mike Flood recently stated in an interview:
SEC should not be able to make rules that affect bank custody services.
The U.S. 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:
U.S. banks have given up a crucial role in Bitcoin ETFs, and the Bank Trade Alliance has written to the SEC requesting that they 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.
Insiders revealed that the Republican-led House Financial Services Committee could vote to abolish the SEC guidance as early as this month.
SEC
Bitcoin ETF
Staff Accounting Bulletin No. 121
Banks
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