Nikolas Sargeant
A coalition of prominent organizations, including the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association, recently penned a letter to SEC Chair Gary Gensler on Feb. 14. They emphasized the absence of U.S. banks as asset custodians in the approved spot Bitcoin ETFs, despite their customary role in other exchange-traded products (ETPs).
The letter specifically called for a reevaluation of Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, which provides guidelines for accounting for crypto asset custody obligations. The groups argued that modifications were necessary due to recent developments, including the SEC's approval of spot Bitcoin ETFs.
Current guidelines in SAB 121 obligate banks to hold crypto assets on their balance sheets, resulting in increased costs and limitations on their ability to offer crypto custody services on a larger scale. The coalition proposed narrowing the definition of crypto assets in SAB 121 to exclude traditional assets recorded on the blockchain, preventing strict crypto guidance from applying to assets like tokenized deposits.
Additionally, the group advocated for exempting banks from on-balance sheet requirements while maintaining disclosure obligations. This adjustment would enable banks to participate in certain crypto activities while ensuring transparency for investors.
Analysts suggest that this lobbying effort indicates a shift in the regulatory landscape for crypto in Washington, with banks expressing interest in embracing the digital finance wave. Bitwise Chief Investment Officer Matt Hougan emphasized the significance of the letter in changing the tone around crypto regulation, while Bloomberg ETF analyst Eric Balchunas highlighted that U.S. banks are actively seeking key roles in Bitcoin ETFs.
TheBitcoin Therapist, a weekly Bitcoin newsletter author, echoed this sentiment, stating that bankers are growing frustrated with their inability to offer spot Bitcoin ETFs to their customers, driven by the first-quarter fear of missing out (FOMO). Despite an uptick in outflows from Grayscale, preliminary data from Farside indicates that total aggregate inflows to newly launched spot Bitcoin ETFs have exceeded $4 billion.
