FDIC Vice Chair Criticizes SEC’s Crypto Accounting Guidelines
Travis Hill, the Vice Chair of the Federal Deposit Insurance Corporation (FDIC), has voiced his concerns about the Securities and Exchange Commission’s (SEC) crypto accounting guidelines. During a speech at an event organized by the Mercatus Center, Hill criticized the SEC’s Staff Accounting Bulletin (SAB) 121, which requires firms that hold cryptocurrencies on behalf of customers to record them as liabilities on their balance sheets.
Departure from Traditional Custodian Practices
Hill pointed out that SAB 121 represents a significant departure from traditional custodian accounting practices. In traditional financial institutions, custodial assets have been excluded from balance sheets and considered the customers’ proprietary assets. This treatment ensures clear ownership rights and financial liability.
However, SAB 121 treats cryptocurrencies held in custody differently. This could potentially impact banks’ willingness and ability to provide custody services for digital assets. The publication of SAB 121 in March 2022 has raised concerns within the cryptocurrency community about its potential influence on the banking sector’s involvement with digital assets.
Impact on Bitcoin ETFs and the Market
Hill also highlighted the implications of SAB 121 on spot bitcoin exchange-traded funds (ETFs) that were approved by the SEC earlier in the year. Some legislators have suggested that this announcement could prevent banks from serving as custodians for such ETFs, limiting investors’ access to safe and regulated custody services.
Hill expressed skepticism about allowing a single crypto exchange to dominate custody services for approved bitcoin exchange-traded products while excluding highly regulated banks from participating in the market.
Additionally, Hill criticized the SEC for having a broad definition of crypto assets, which could include tokenized versions of real-world assets. He called for more clarity and specificity in the regulatory guidance and supported a positive approach that involves soliciting public comments before issuing major policy directives, resulting in balanced and effective regulations.
Calls for Clarity and Legislative Review
The dispute over SAB 121 has led to legislative efforts to nullify the bulletin. The House Financial Services Committee voted to move a resolution to this effect, reflecting bipartisan concerns about the implications of the bulletin. The Government Accountability Office also stated that Congress must review the bulletin before it goes into effect.
Hill’s critique highlights the need for regulatory transparency and careful integration of digital assets into the traditional banking system. He emphasized the importance of understanding the impact of disruptive technologies like blockchain and distributed ledger technology on banking and financial services. There is a push for regulators to balance innovation with consumer protection and financial stability.
Hot Take: FDIC Vice Chair Criticizes SEC’s Crypto Accounting Guidelines
Travis Hill, the Vice Chair of the Federal Deposit Insurance Corporation (FDIC), has raised concerns about the Securities and Exchange Commission’s (SEC) crypto accounting guidelines. Hill criticized the SEC’s Staff Accounting Bulletin (SAB) 121, which requires firms holding cryptocurrencies on behalf of customers to record them as liabilities on their balance sheets. This departure from traditional custodian practices could impact banks’ ability to provide custody services for digital assets. Additionally, Hill pointed out that SAB 121 could restrict banks from being custodians for bitcoin exchange-traded funds (ETFs), limiting investors’ access to regulated custody services. He called for more clarity and specificity in regulatory guidance and highlighted the need for regulatory transparency when integrating digital assets into traditional banking systems.
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