Financial banks in the United States have submitted a letter to the U.S. Securities and Exchange Commission (SEC) requesting an adjustment to the outlined crypto guidance. These financial institutions will benefit from the flourishing spot Bitcoin exchange-traded fund (ETF) business if the request is granted.
Why Can’t U.S. Banks Invest in Crypto Products?
In April 2022, the SEC effected the Staff Accounting Bulletin 121 (SAB 121), a regulatory guidance that defines how companies store crypto assets for customers. The agency explained that these financial organizations must record any crypto investment as a liability on their balance sheet. It implies that banking institutions need to set aside additional assets with equivalent value to protect customers from losses.
With the SAB 121 still in effect, a majority of financial institutions find it difficult to offer crypto products to users because the extra capital needed makes these services expensive for companies to handle.
A Push Towards Crypto Adoption
A trade group coalition comprising the American Bankers Association, the Bank Policy Institute, the Financial Services Forum, and the Securities Industry and Financial Markets Association jointly issued the letter to the American regulatory agency on February 14th.
Expressing their concerns regarding the need for modification of the SAB 121, the trade group’s letter stated:
“The Commission recently approved 11 Spot Bitcoin ETPs, allowing investors access to this asset class through a regulated product. However, notably absent from those approved products are banking organizations serving as the asset custodian, a role they regularly play for most other ETPs.”
Financial companies offering the spot Bitcoin ETF have employed Coinbase, BitGo, Gemini, and others as crypto custodians.
Among the requests stated in the letter is the exclusion of certain assets from the SEC’s strict regulatory guidance. This means that U.S. banks and other financial organizations should be able to easily access traditional assets stored on the blockchain, such as tokenized assets. Also, they should be able to tap into SEC-approved financial products like the spot Bitcoin ETF.
Public data shows that financial companies offering the spot Bitcoin ETFs have raked in as much as $12.8 billion from U.S. investors.
