A coalition of U.S. banks is urging the United States Securities and Exchange Commission (SEC) to reconsider its contentious Staff Accounting Bulletin 121 (SAB 121). This appeal comes after the banks were omitted from the opportunity to act as asset custodians for spot-Bitcoin exchange-traded funds (ETFs), as outlined in a letter dated February 14th addressed to the regulatory body.
SAB 121 Under Crtique From U.S. Banks
The trade group coalition, comprised of the American Bankers Association, the Financial Services Forum, the Bank Policy Institute, and the Securities Industry and Financial Markets Association, contended that the guidelines established by SAB 121, prohibiting banks from being designated as asset custodians for spot-Bitcoin ETFs, could raise significant concerns about the safety and stability of this sector.
In their letter, the coalition stated, “We believe that this outcome could lead to concentration risk, as a single nonbank entity currently acts as custodian for the majority of these ETPs. This risk could be mitigated if prudentially regulated banking organizations were afforded the same opportunity to offer custodial services for ETPs regulated by the Commission, alongside qualified nonbank asset custodians.”
Should The SEC Change The Definition Of Crypto-Assets?
Additionally, the trade group coalition urged the SEC to revise its definition of crypto-assets, which currently may exclude certain applications such as spot-bitcoin ETFs and tokenized deposits if they are approved.
The letter emphasized, “SAB 121 fails to differentiate between asset types and their respective use cases, instead broadly asserting that crypto-assets present various technological, legal, and regulatory risks necessitating on-balance sheet treatment. However, notable disparities exist between cryptocurrencies like Bitcoin, which operate on a public, permissionless network, and traditional financial instruments recorded on a blockchain network with controlled access and the ability to adjust or revoke transactions.”
Following the letter’s publication, several prominent figures in the crypto industry shared their perspectives on the matter.
“If you were curious whether bitcoin ETFs would influence the attitude towards crypto regulation in Washington, here’s your answer,” tweeted Matt Hougan, CEO of BitWise Invest.
“They’re angling for a share of the market,” noted Eric Balchunas, Senior ETF Analyst at Bloomberg, in a post on X. “Can’t say I blame them; it’s not exactly equitable.”
“The Financial System Will Be Worse Off” Without U.S. Banks
Should the SEC accede to the requests outlined in the letter, U.S. banks would assume a more significant role in managing digital assets.
The letter asserted, “If prudentially regulated banking institutions are essentially barred from offering digital asset custody services on a large scale, investors, customers, and ultimately the financial system would suffer. This would restrict the market to custody providers that do not extend the legal and supervisory safeguards offered by federally-regulated banking institutions to their clients.”
