Major Banks in the US Push for Participation in Bitcoin ETF Market
Several major banks in the United States are urging the Securities and Exchange Commission (SEC) to allow their involvement in the newly approved spot Bitcoin ETFs market. In a joint letter addressed to SEC Chair Gary Gensler, leading banking associations including the Bank Policy Institute (BPI), the American Bankers Association (ABA), the Financial Services Forum, and the Securities Industry and Financial Markets Association (SIFMA) have requested modifications to Staff Accounting Bulletin No. 121 (SAB 121).
Challenges Faced by Banks and Their Demands
The banks are actively lobbying the SEC to enable their participation in the spot Bitcoin ETF landscape. They argue that the broad definition of “crypto-assets” in SAB 121 excludes them and hinders banking organizations from utilizing distributed ledger technology (DLT) to record traditional financial assets.
The letter highlights specific examples of how SAB 121 adversely affects banking organizations, such as their exclusion from serving as asset custodians for recently approved Spot Bitcoin ETFs due to regulatory capital requirements imposed by the bulletin.
The banks have asked the SEC to reconsider a rule that made it more costly for conventional banks to provide services related to cryptocurrency custody. They propose restricting the definition of crypto assets in SAB 121, which would exempt assets like tokenized deposits from stringent crypto regulations.
Additionally, they suggest exempting banking organizations from on-balance sheet treatment while maintaining disclosure requirements to ease regulatory burdens without compromising investor protection. The associations express their commitment to collaborating with the SEC to ensure regulatory frameworks support responsible innovation while upholding investor protection and market integrity.
The Growing Importance of Spot Bitcoin ETFs
This letter signifies a significant shift within the traditional banking sector as financial institutions recognize the potential of Bitcoin ETFs to meet the rising demand for cryptocurrency investment products among retail and institutional investors. It remains to be seen if the SEC will allow regulated banking organizations to participate in the evolving digital assets and DLT landscape, aligning with industry efforts to navigate regulatory challenges and foster responsible innovation.
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