US Banking Giants Advocate for Spot Bitcoin ETF Custodianship in Joint Letter to SEC Chairman
Major US banking institutions have come together to send a joint letter to the US Securities and Exchange Commission (SEC), urging for the approval of spot Bitcoin exchange-traded fund (ETF) custodianship. The letter, dated Valentine's Day and signed by four industry leaders, addresses SEC Chairman Gary Gensler and requests a modification of a law passed in 2022, known as SAB No. 121, which regulates crypto custodianship. The banks argue that this law hampers their ability to participate in the crypto market.
SAB No. 121 currently mandates that entities holding digital assets must list them on their balance sheet at a fair value. However, the Bank Policy Institute American, the Bankers Association, the Financial Services Forum, and the Securities Industry and Financial Markets Association claim that this requirement restricts their potential involvement. They have expressed their concerns to the SEC multiple times, highlighting the negative impact of the on-balance sheet requirement and its prudential implications.
The banking organizations stress that the on-balance sheet treatment prevents them from offering custodial services for digital assets on a large scale. Additionally, they argue that the broad definition of "crypto asset" in SAB No. 121 has a chilling effect on developing responsible use cases for distributed ledger technology (DLT).
To address these concerns, the banking groups propose narrowing down the definition of "crypto asset" and exempting banking organizations from listing the assets on their balance sheet. However, they advocate for maintaining disclosure requirements. This solution, they believe, would mitigate the worries raised by banking institutions without undermining the objective of SAB No. 121 to promote transparency to investors.
This joint letter represents a strong push from the US banking sector to shape the regulatory landscape for cryptocurrencies. With the rise in popularity and adoption of Bitcoin and other digital assets, banks are keen to capitalize on the potential opportunities. The SEC will need to carefully consider the arguments put forth by these influential institutions, considering the wider implications for the financial industry.
Analyst comment
Neutral news. The banking giants are requesting changes to a law that regulates crypto custodianship, arguing that it hinders their ability to participate in the market. They propose exempting banking organizations from on-balance sheet treatment but maintaining disclosure requirements. The impact on the market would depend on whether the SEC agrees to modify the law in favor of the banking giants.
