Significant Joint Letter From Leading Financial Associations
On February 14, 2024, four leading financial associations sent a letter to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC).
Concerns Highlighted By the Associations
The associations highlighted the challenges introduced by SAB 121 for regulated banking organizations, emphasizing the on-balance sheet requirement and broad definition of “crypto-asset” as deterrents to responsible use cases for distributed ledger technology (DLT).
Specific Concerns Raised
- Spot Bitcoin ETPs: The approval of 11 Spot Bitcoin Exchange-Traded Products (ETPs) by the SEC has raised concerns about the safety and stability of the ecosystem due to the ineligibility of banking organizations to provide custodial services.
- Use of DLT for Traditional Financial Assets: The broad definition of “crypto-asset” has posed a barrier to meaningful engagement in DLT-based projects by banking organizations, particularly impacting traditional financial assets.
Modifications and Clarifications Proposed
The letter outlines targeted modifications to SAB 121, including narrowing the definition of “crypto-assets” and exempting banking organizations from on-balance sheet treatment of crypto-assets.
Future Steps
The associations express their willingness to work collaboratively with the SEC to refine SAB 121, emphasizing their shared goals of investor protection, market integrity, and financial stability. They request a meeting with Chair Gensler and SEC staff to discuss their proposed modifications in detail.
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