The Bank Policy Institute, the American Bankers Association, the Securities Industry and Financial Markets Association and the Financial Services Forum have petitioned the SEC to change accounting guidelines that make it more expensive for US banks to hold digital assets for their customers. The banks believe that, with the approval of Bitcoin ETFs, there is no longer any reason for them to comply with the guidelines of Staff Accounting Bulletin N°121.
American banks now want to hold Bitcoin
While some banking institutions remain highly critical of Bitcoin others are beginning to change their misperception of the cryptocurrency. Four major US banks have written a letter to the Security and Exchange Commission (SEC) requesting the amendment of Staff Accounting Bulletin N°121 (SAB 121), a 2022 text setting accounting guidelines for US banks holding crypto.
According to Bank Policy Institute, American Bankers Association, Securities Industry and Financial Markets Association and the Financial Services Forum several major developments have taken place over the past two years, reminding us of the need to amend SAB 121. The 4 banks cite among others the approval of Bitcoin ETFs by the SEC, thus regulating investment in Bitcoin. While Bitcoin ETF managers have already recorded billions of dollars in inflows, it’s impossible for banks to profit from Bitcoin because of the SAB 121 requirements, the 4 banks complain.
The SEC recently approved 11 Spot Bitcoin ETPs, allowing investors to access this asset class via a regulated product. However, banking organizations acting as asset custodians, a role they regularly play for most other ETPs, are notably absent from these approved products.
Letter from 4 American banks.
SAB 121, the legislation disapproved by banks in the U.S.
In the United States, banks wishing to hold crypto for their customers are required to comply with the Staff Accounting Bulletin N°121 (SAB 121). Published in 2022, this text sets out a number of accounting guidelines for the banking institutions concerned.
One of SAB 121’s directives, and probably the most reviled, is the requirement for banks to account for cryptocurrencies in their custody as liabilities on their corporate balance sheets. This means that banks must set aside capital equivalent to the value of the digital assets held to protect against any potential losses.
According to the 4 banks, this measure puts US crypto users at risk. The high cost of this measure makes it difficult for banks to hold crypto on a large scale. Paradoxically, crypto custody service providers such as exchanges are not subject to SAB 121. These players are thus establishing themselves as crypto custody services, even though they lack the legal guarantees of supervision and protection offered by banking institutions.
Gone are the days when all the banking institutions vilified Bitcoin all day long. Today, it’s the banks that are mobilizing to hold the queen of cryptocurrencies. This just goes to show how far Bitcoin has come in just fifteen years of existence.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.
