As an experienced financial analyst, I am deeply concerned about the impact of SAB 121 on the crypto custody services offered by banks. The strict accounting requirements under this guidance make it inefficient and costly for large financial institutions to offer these services. This situation not only harms consumers but also makes our digital asset ecosystem less safe, as highlighted by Chairman McHenry.
As a researcher studying the impact of regulatory requirements on financial institutions, I’ve come across the Securities and Exchange Commission’s Accounting Bulletin 121 (SAB 121). This regulation necessitates that companies, including large banks, classify cryptographic assets held in custody for clients as liabilities on their balance sheets. Consequently, providing crypto custody services becomes less financially advantageous for these institutions due to the inefficiencies associated with holding such assets as liabilities.
The House and Senate adopted a bipartisan Congressional Review Act (CRA) resolution in two separate votes to annul this administration guidance issued by the Biden Administration. However, this action was subsequently vetoed by the Administration in May.
As a researcher, I have uncovered that on July 11, the House attempt to override a veto did not gather the necessary two-thirds majority, resulting in a vote of 228 in favor and 184 against, as reported by the American Banker.
SAB 121 Threatens Safe Custody
Pro-crypto Chairman of the House Financial Services Committee, Patrick McHenry, commented:
“The legislation on digital assets, which was the first to be approved by both the House and the Senate in the US, was recently vetoed by President Biden despite bipartisan support and significant advancements.”
Hey, @POTUS—Notice anything about these pictures?
The bipartisan consensus in Congress is unequivocal: the Securities and Exchange Commission’s (SEC) SAB 121 is detrimental to consumers and undermines the security of our digital asset marketplace, rather than enhancing it.
— Financial Services GOP (@FinancialCmte) July 11, 2024
This week, the American Bankers Association, Bank Policy Institute, Financial Services Forum, and Securities Industry and Financial Markets Association collectively wrote a letter to the House expressing their concerns.
“The SAB 121 rule marks a major shift from traditional accounting practices regarding custodial assets, potentially impairing the security and reliability that the industry offers its clients in safeguarding their digital assets.”
Despite the strict enforcement of SAB 121 in the past, the SEC now provides banks and brokerages with an alternative to reporting their clients’ crypto holdings on their balance sheets. According to Bloomberg’s report on July 11, this marks a shift in policy.
According to Amanda Iacone from Bloomberg, financial institutions can circumvent the contentious accounting rules for crypto assets by implementing safeguards to mitigate related risks. Essentially, this means taking steps to secure client funds in the event of insolvency or collapse.
As an analyst, I’d interpret your statement as follows: It seems the Securities and Exchange Commission (SEC) is considering loosening the rules set forth in SAB 121 regarding banking institutions and brokerage firms.
Reaction to Congress’s campaign for change?
SEC Allows Some Exceptions to Crypto Accounting Compliance via @Aiacone
— Eleanor Terrett (@EleanorTerrett) July 12, 2024
SEC Softens, But SAB 121 Remains
As a researcher, I’ve discovered that some major banks have been collaborating with the Securities and Exchange Commission (SEC) since 2023. They have been granted exemptions to waive balance sheet reporting under specific circumstances after receiving approval from the SEC.
The SEC now holds the view that the initial directive has effectively addressed the need for businesses to manage risks related to cryptocurrency holdings, both in terms of security and legality.
As a financial analyst, I can suggest that this new flexible approach might enable a larger number of banking institutions and corporations to enter the crypto custody market in the United States. Consequently, it would broaden the range of choices available for American crypto investors.
Although the SEC has become more lenient recently, SAB 121 continues to be enforced after the unsuccessful effort to overturn President Biden’s veto in the House this week.
Read More
- PENDLE PREDICTION. PENDLE cryptocurrency
- CKB PREDICTION. CKB cryptocurrency
- PBX PREDICTION. PBX cryptocurrency
- USD DKK PREDICTION
- GEAR PREDICTION. GEAR cryptocurrency
- USD VND PREDICTION
- ICP PREDICTION. ICP cryptocurrency
- EUR INR PREDICTION
- LDO PREDICTION. LDO cryptocurrency
- BONE PREDICTION. BONE cryptocurrency
2024-07-13 01:31