The Bank Policy Institute, American Bankers Association, Financial Services Forum, and SIFMA Request Modifications to Staff Accounting Bulletin No. 121
The Bank Policy Institute (BPI), American Bankers Association (ABA), Financial Services Forum, and Securities Industry and Financial Markets Association (SIFMA) have collectively addressed a letter to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC). They are requesting targeted modifications to Staff Accounting Bulletin No. 121 (SAB 121) in order to address challenges faced by U.S. banking organizations in digital asset custody. The aim is to align the provisions of SAB 121 with recent policy developments and practical experience without compromising investor information.
Concerns About On-Balance Sheet Requirement for Crypto-Asset Custody
The banking and financial associations express concerns about the on-balance sheet requirement for safeguarding crypto-assets, which has hindered banking organizations from effectively providing digital asset custody services at scale. They argue that this restriction, combined with a broad definition of “crypto-asset,” has limited the development of distributed ledger technology applications beyond cryptocurrencies.
Reevaluation of SAB 121 in Light of Recent Developments
The associations highlight recent SEC approvals of Spot Bitcoin ETPs and proposed rules on Safeguarding Advisory Client Assets as developments that warrant a reevaluation of SAB 121. They emphasize that current regulations have driven digital asset custody services away from banking organizations, potentially compromising the safety and stability of the financial system due to a lack of regulatory oversight.
Recommendations for Refining SAB 121
To address these challenges, the associations recommend narrowing the definition of “crypto-assets” to exclude traditional financial assets recorded or transferred using distributed ledger technology. They also propose exempting banking organizations from on-balance sheet treatment while maintaining disclosure requirements. These adjustments would allow banking organizations to participate in the digital asset ecosystem without unnecessary regulatory burdens.
Request for Meeting with the SEC
The banking and financial associations request a meeting with the SEC to discuss their proposed modifications to SAB 121. They emphasize their commitment to collaborating with the Commission and stress the importance of considering technological advancements and policy developments since the issuance of SAB 121.
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