Interest in spot Bitcoin ETFs among financial institutions such as banks and brokerages is growing as they push for the Securities and Exchange Commission (SEC) to change the definition of crypto assets.
Under the new definition, they would play a larger role in crypto, for example as custodians of Bitcoin ETFs.
Banks Ask SEC for Crypto Reviews
On February 14, a coalition of trade groups, including the Bank Policy Institute, the American Bankers Association, the Financial Services Forum and the Securities Industry and Financial Markets Association, sent a letter to SEC Chairman Gary Gensler with a request. He pointed to the recently approved spot Bitcoin ETFs and noted the absence of U.S. banks as custodians of these products.
The coalition requested that the SEC review and consider amending Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, providing guidance on accounting for custody obligations for crypto assets. They pointed out that two years have passed since the guidance was published and that significant developments have taken place during this period, including the approval of spot Bitcoin ETFs.
The current guidelines outlined in SAB 121 require banks to hold digital assets on their balance sheet, which is considered costly and limits their ability to offer cryptocurrency custody services on a larger scale. The group wants the SEC to narrow the definition of cryptocurrencies to exclude traditional assets recorded on the blockchain, ensuring that assets such as tokenized deposits are not subject to strict crypto guidelines.
Additionally, they requested that banks be exempted from the balance sheet requirements stipulated in SAB 121. However, they advocated for continued disclosure requirements, allowing banks to participate in certain crypto activities while ensuring transparency for investors.
FOMO Takes On Banks With Crypto ETF Exclusion
In an article on X, Matt Hougan, Chief Investment Officer of Bitwise REMARK that the letter states that Bitcoin ETFs have changed the “tone around crypto regulation in Washington” as banks are eager to participate in the “digital financial wave.”
An author of the weekly Bitcoin newsletter, The Bitcoin Therapist, sharp that Q1 FOMO is already driving banks crazy since they can't hold BTC ETFs for their clients.
Meanwhile, as Bitcoin exchange-traded funds (ETFs) continue to gain momentum, the investment class is becoming increasingly attractive compared to traditional assets like gold. Recent reports indicate a significant shift in investor sentiment, with more than $3 billion in gold exchange-traded funds (ETFs) having been sold since the start of the year.
On the other hand, Bitcoin ETFs have grown and managed to amass over $4 billion in inflows, even though they are only 1/13 the size of the gold ETF market.
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