February 21, 2024
By Anjali Kochhar
Major US financial institutions are pushing the Securities and Exchange Commission (SEC) to reevaluate its position on cryptocurrencies in a ground-breaking move. The banks are requesting permission from the SEC to become custodians of the recently launched spot Bitcoin ETFs, allowing them to venture into the cryptocurrency space.
According to Currency Analytics, on February 14, a consortium consisting of the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association collectively filed a formal petition with the SEC. The appeal underscores the recent authorization of spot Bitcoin ETPs while noting the notable absence of banking entities as custodians for these assets.
The letter addressed to the SEC emphasized the necessity for changes to the current regulations, mentioning SAB 121 sections in particular. The banks are pushing for more latitude so they may take on the vital responsibility of acting as custodians for the recently introduced Bitcoin ETFs.
The financial industry is concerned about the exclusion of banking institutions from serving as custodians for the approved cryptocurrency products. Banks have been unable to engage in custodial services despite large inflows into spot Bitcoin ETPs, citing regulatory restrictions.
The appeal made by US banks to the SEC is indicative of a wider change in traditional financial institutions’ attitudes regarding cryptocurrencies. Experts in the field see this as a sign that digital assets are becoming more and more accepted in mainstream finance.
Matt Hougan, CEO of Bitwise, praised the letter as a revolutionary move in the direction of regulating cryptocurrencies. He signaled a more optimistic prognosis for cryptocurrency assets by highlighting the significant influence that spot Bitcoin ETFs have had on determining Washington’s regulatory environment.
The absence of American banks serving as custodians for the authorized spot Bitcoin Exchange Traded Products (ETPs) was highlighted in the joint plea on February 14. Banking institutions are having difficulty carrying out their customary function as asset custodians, even with the SEC’s recent approval of 11 spot Bitcoin ETPs. The appeal emphasizes the necessity of amending current provisions, particularly SAB 121, and requests more latitude so that banks can continue to play a vital role in protecting the recently introduced Bitcoin ETFs.
The letter emphasizes the importance of the involvement of American banks in custodianship, a role they regularly fulfill for the majority of other ETPs.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
