US banking groups lobby SEC for rule change to enter Bitcoin ETF market

Extra than one US banking groups are attempting to salvage inclusion within the Bitcoin change-traded funds (ETFs) landscape, prompting a put a matter to of for a rule change to facilitate their participation.

In a Feb. 14 letter to SEC Chair Gary Gensler, a coalition comprising the Financial institution Protection Institute, the American Bankers Association, the Securities Industry and Financial Markets Association, and the Financial Companies Discussion board advocated their stance.

Crypto custodial

The coalition urged the SEC to reassess a legislation that made it expensive for used banks to present crypto custody products and companies. Present suggestions require these financial institutions to categorise cryptocurrencies as liabilities on their steadiness sheets. Resulting from this reality, the banks must allocate property same to the crypto holdings to mitigate doable losses and hold to the strict regulatory capital requirements.

The coalition contended that this rule hampered them from performing as custodians for the newly presented Bitcoin ETFs, a assignment they recurrently undertook for most varied Alternate-Traded Merchandise (ETPs). This limitation, the personnel argued, stemmed from components such because the “Tier 1 capital ratio and varied reserve and capital requirements.”

They added:

“If regulated banking organizations are successfully precluded from providing digital asset safeguarding products and companies at scale, traders and possibilities, and indirectly the financial design, will be worse off, with the market little to custody companies that fabricate no longer have ample money their possibilities the ethical and supervisory protections equipped by federally-regulated banking organizations.”

The personnel further emphasized the must mitigate the concentration probability of a single non-financial institution entity dominating the custodial products and companies for these Bitcoin ETFs. Per the personnel, allowing prudentially regulated banks to present custodial products and companies for SEC-regulated ETFs, reminiscent of qualified non-financial institution asset custodians, could perhaps address this distress.

Coinbase, the excellent US-primarily based crypto procuring and selling platform, is the unnamed non-financial institution entity mentioned within the letter. The change serves because the asset custodian for 8 of the ETF issuers.

Suggestions

The personnel urged the SEC to refine the definition of crypto outlined in Workers Accounting Bulletin 121 (SAB 121) to exclude used financial property recorded or transferred on blockchain networks.

“SAB 121 makes no distinction between asset forms and use cases, but as a substitute veritably states that crypto-property pose obvious technological, ethical, and regulatory risks requiring on-steadiness sheet remedy,” they added.

Furthermore, they proposed exempting banks from the on-steadiness sheet requirements while upholding disclosure obligations. This capability would allow banks to partake in pick out crypto activities while inserting forward transparency for traders.