- Congress has aimed for a bipartisan effort to overturn an SEC guideline seen as a barrier to crypto adoption.
- The resolution has targeted SAB 121, which requires banks to record digital assets on their balance sheet.
- The resolution has had potential implications for the approval of spot Ethereum ETFs.
The House Financial Services Committee (HSFC) recently passed a resolution that could significantly impact how institutions engage with Bitcoin and other cryptocurrencies. The resolution, garnering bipartisan support, seeks to overturn a key guideline issued by the Securities and Exchange Commission (SEC) , which is seen as a major hurdle for banks offering crypto custody services.
SEC Rule SAB 121 Challenged
The specific guideline is Staff Accounting Bulletin 121 (SAB 121) , which requires banks to include digital assets on their balance sheets. Unlike traditional securities, this accounting treatment creates significant capital and liquidity challenges for banks, effectively deterring them from entering the crypto custody space.
Proponents of the resolution, led by US Representatives Wiley Nickel and Mike Flood, argue that SAB 121 hinders consumer protection by limiting the pool of qualified custodians. They believe allowing regulated banks to participate, with their expertise and established regulatory framework, would ultimately benefit the market.
This sentiment is echoed by the Chamber of Digital Commerce, a leading industry advocacy group, who view the resolution’s progress as a critical step towards addressing the overreach of SAB 121. They emphasize the potential benefits for both consumers and the digital asset market.
Could This Help Ethereum ETFs?
However, legal experts like Jake Chervinsky caution that the resolution may face an uphill battle in Congress, with its passage through the House potentially being the final stage. He suggests that legal challenges might be a more realistic avenue for achieving the desired outcome. The resolution could also hold implications for approving a spot Ethereum exchange-traded fund (ETF).
The resolution’s proponents argue that the current reliance on a limited number of custodians, particularly the dominance of a single entity, creates unnecessary concentration risk. They believe wider participation from banks, with their established risk management practices, would address this concern.
On the Flipside
- While the resolution aims to remove a hurdle for banks, it could also introduce new regulations and compliance requirements for them to engage in crypto custody.
- The resolution primarily targets crypto custody services, and its impact on the approval of spot Ethereum ETFs remains uncertain.
Why This Matters
This resolution, if successful, could pave the way for wider institutional adoption of cryptocurrencies by addressing a key hurdle for banks and potentially fostering a more robust and competitive crypto custody landscape.
To learn more about the U.S. Treasury Department’s concerns regarding cryptocurrencies, read here:
U.S. Treasury Spotlights Crypto Risks in Congress Testimony
To learn more about the US government transferring seized Bitcoin, read here:
Nearly $1B Bitcoin Transferred by US Govt as Value Hits $60K
