US Banks Lobby SEC to Change Crypto Rules, Eye Bitcoin ETF Custodian Role

According to Cointelegraph: Major US banks and financial institutions are urging the Securities and Exchange Commission (SEC) to reconsider its definition of crypto assets. This review could allow these banks to play a larger role in the cryptocurrency field, such as serving as custodians to the recently approved spot Bitcoin Exchange-Traded Funds (ETFs). Screenshot from letter sent from banking trade group to SEC. Source: ABA In a letter to SEC Chair Gary Gensler on February 14, a coalition of trade groups including the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association made their case. They pointed out the absence of American banks as asset custodians in the recently approved Bitcoin ETFs, a role they regularly play for most other ETFs. The group called for modifications to the SEC's Staff Accounting Bulletin 121 (SAB 121), which guides accounting for crypto asset custody obligations. It requires banks to hold crypto assets on their balance sheet, increasing costs and limiting their capability to offer crypto custody services on a large scale. The trade group seeks a narrower definition of crypto assets in SAB 121 to exclude traditional assets recorded on the blockchain. They also hope to exempt banks from on-balance sheet requirements while maintaining disclosure obligations, thus enabling engagement in certain crypto activities with transparency for investors. As Bitcoin ETFs have seen record inflows in 2024, industry analysts interpret this as a clear sign of banks' interest in participating in the evolving digital finance landscape.