The U.S. Securities and Exchange Commission (SEC) has taken a step to help banks expand into the crypto space by amending a rule that made it look as a liability and difficult for them to hold digital currencies like bitcoin.
The rule, known as Staff Accounting Bulletin 121 (SAB 121), went into effect in 2022 under President Biden. It made banks view digital tokens as a liability on their books, which increased their cost of funds and financial risk according to reports from Financial times.
For this reason, banks were not very enthusiastic about offering crypto services, such as the custody of digital assets on their behalf. With this change, the SEC is making it more viable for banks to offer crypto custody services without having to endure hefty fines.
Mark Palmer, a Benchmark Company analyst, said the previous rule “created a punitive environment” where it was difficult for banks to provide crypto services. By repealing the rule, Palmer continued, “Traditional banks will now be able to offer crypto custody services without facing de facto penalties.”
This move from the SEC is part of new changes in regulation under the Trump administration to become more crypto-friendly. Financial regulators are actively looking to craft a more clearer policy for cryptocurrencies.
President Trump recently signed an executive order on Thursday setting priorities for cryptocurrencies, and requesting cabinet members to suggest recommendations on future regulations.
Even prior to this action from the SEC, major U.S. banks have been looking to provide crypto services. Charles Schwab CEO Rick Wurster stated, “We do want to have the ability to offer spot crypto, and our expectation is that someday the regulations around crypto are going to allow us to do that.”.
Trade associations like the American Bankers Association have also welcomed the decision. Financial Services Forum President, Kevin Fromer stated that this move is “a step in the right direction.”
The move is clearly giving theses banks and institutions the opportunity to seize more opportunities in the crypto market
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