Big US banks pressure SEC to change rules so they can be custodians of Bitcoin ETF assets

Large US banks are lobbying the Securities and Exchange Commission (SEC) to change existing rules to make it possible for them to hold digital assets on behalf of bitcoin ETF clients.

in a letter As of February 14, several leading financial firms in the US urged SEC Chairman Gary Gensler to change the definition of cryptoassets. Doing so will allow these companies to venture deeper into the crypto industry as custodians of digital assets.

US Banks Complain About Missing Out on Spot bitcoin ETFs

The letter said that US banks are missing out on the custody business of newly approved bitcoin exchange-traded funds (ETFs).

US banks, left out of key functions of bitcoin ETFs, are pressing the SEC to change guidance on holding digital assets. A coalition of banking trading GPs sent a letter to the SEC asking them to exclude ETFs from the broad crypto umbrella. They want a piece of the action. I don't blame them, it's not fair.… pic.twitter.com/advPa94nK2

– Eric Balchunas (@EricBalchunas) February 15, 2024

Banks cannot act as asset custodians of bitcoin ETFs due to Staff Accounting Bulletin 121 (SAB 121) guidance issued in March 2022.

The SAB 121 guideline obliges banks to hold cryptocurrencies on their balance sheet. Doing this is a costly affair and prevents banks from exploring custody of crypto assets.

The banks now want the SEC to consider modifications to the guidelines. They request that banks be exempt from holding cryptocurrencies on their balance sheets. Instead, the SEC should require them to provide disclosures when engaging in crypto activities to maintain transparency, the letter said.

The banks also said that the SAB 121 guidelines were outdated as they were formulated before the approval of spot bitcoin ETFs.

bitcoin ETF Inflows Surge

bitcoin spot ETFs have achieved positive net flows of $4.5 billion since their launch, while ETFS offered by BlackRock and Fidelity attracted more assets during their first month of trading than any other ETF launched in the United States in the last three decades.

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