The Securities and Exchange Commission (SEC) has paved the way for banks and brokerages to sidestep reporting their customers’ cryptocurrency holdings on balance sheets. This follows the SEC’s new guidance, offering companies an alternative path to navigate controversial crypto accounting rules.
Under this guidance, some major banks have received approval to forgo balance sheet reporting by implementing robust safeguards to protect crypto assets in case of insolvency or failure. These measures, which include enhanced internal controls, aim to mitigate legal risks associated with the volatile crypto landscape.
The SEC believes these adjustments effectively address concerns stemming from cyber threats and operational risks that have historically plagued crypto investments. By easing reporting requirements, the SEC aims to broaden the accessibility of crypto services offered by traditional financial institutions, which were previously deterred by stringent capital requirements tied to larger balance sheets.
However, industry groups have lobbied Congress to overturn the SEC’s staff guidance, arguing it imposes undue restrictions on financial innovation. Despite legislative challenges, the SEC’s stance marks a significant shift in the regulatory approach, potentially expanding options for American crypto holders seeking secure storage solutions.
Bank and financial industry trade groups have urged Congress to rescind the staff guidance, which acts as an agency rule. On Thursday, the House attempted but failed to override a presidential veto of a measure aimed at revoking Staff Accounting Bulletin 121, effectively leaving the measure in place.
Financial institutions, eager to capitalize on the growing crypto market, are eyeing opportunities now that the SEC has greenlit spot Bitcoin products. Aaron Jacob of TaxBit underscores the industry’s readiness to embrace crypto, noting that these developments could democratize access to crypto services among mainstream financial players.