Media: SEC crypto accounting guidance undermines banks’ initiatives

The SEC requirement that all U.S. public companies account for customer-held digital assets as liabilities has negatively affected banks’ projects, Reuters reports.

The proposal appears in the Commission’s guidance issued in March this year. According to the document, firms are required to increase cash and cash equivalents due to the growth of such liabilities.

The regulator also noted the need to disclose technology-related, legal and regulatory risks.

According to sources familiar with the agency, the SEC did not consult with the banking regulator on this issue.

“The document came out without feedback, without industry consultation,” said Trey Hollingsworth, a member of the U.S. House of Representatives Committee on Financial Services.

Basel Committee on Banking Regulation standards, as expected, could also impose stringent capital requirements and risk restrictions on crypto custodians.

Together with the SEC’s recommendations they could further erode the attractiveness of holding digital assets for U.S. banks.

Journalists noted that the Commission’s actions have complicated banks’ efforts to enter the digital assets market. They may abandon these plans, even amid growing client demand.

The fifth-largest by assets in the United States, US Bank told Reuters that it is suspending onboarding of new clients from the industry until it assesses the changing regulatory environment.

Head of State Street Digital Nadine Chakar said that management will not hinder offering crypto custody services, but will render them economically unviable.

BNY Mellon declined to comment on the status of its crypto-related projects.

Representatives of an unnamed European bank planning to enter the U.S. market with a similar product said it would be “prohibitively expensive” under the new framework.

Reuters, citing sources familiar with the matter, reported efforts to lobby for excluding banks from the guidance or providing softer supervisory terms.

Stakeholders also expect the banking regulator to issue special guidance that would ease capital requirements for working with digital assets.

Fed, FDIC and OCC did not respond to the agency’s request.

In June 2022, Citigroup selected an infrastructure company Metaco as a partner to launch pilot platform for custody and management of digital assets.

On September 21, 2020, the OCC allowed national banks and federal savings associations to hold reserves of stablecoin issuers.

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