The U.S. Securities and Exchange Commission (SEC) has relaxed crypto reporting requirements for banks and brokerages, allowing them to exclude customers’ crypto holdings from balance sheets, provided they ensure asset protection in case of bankruptcy.
Regulatory Shift
In a significant regulatory shift, the SEC has allowed banks and brokerages to bypass balance sheet reporting for customers’ crypto holdings. This move comes amid ongoing debates in Congress over the controversial SAB 121 crypto-accounting guidance, which the House recently failed to overturn despite a presidential veto.
Banks’ New Reporting Pathway
According to an SEC source, the regulator is providing guidance that permits certain arrangements where banks are not required to report a liability for crypto holdings on their balance sheets. This adjustment responds to concerns from major banking players and aims to reduce the reporting burden while ensuring customer asset protection in bankruptcy scenarios.
Over the past year, several major banks have consulted with the SEC, receiving approval to bypass balance sheet reporting under specific conditions. These conditions include implementing internal safeguards to enhance the protection of customers’ crypto assets.
Broader Implications
The SEC’s new approach could also apply to other U.S. crypto companies offering services to crypto holders. Financial institutions have argued that strict accounting rules hindered them from providing crypto services, as larger balance sheets would trigger additional capital requirements from regulatory bodies, not the SEC.
Industry Advocacy
Banking and financial industry groups have been pushing for Congress to rescind the staff guidance, which functions as an agency rule. Despite these efforts, the House recently failed to override the presidential veto aimed at revoking Staff Accounting Bulletin 121, leaving the current accounting rules in place.
SEC Consultations
During closed-door consultations, banks successfully argued that wallets and spot Bitcoin ETFs should be excluded from the scope of the SEC’s crypto guidance. This argument appears to have influenced the SEC’s decision to offer more flexible reporting options.
For more updates on regulatory changes and their impact on the crypto industry, stay tuned to Coingape.
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