Originally published on: September 24, 2024
The Bank of New York (BNY) is on the brink of offering custody services for Bitcoin and Ether held by its exchange-traded fund (ETF) clients, thanks to a recent decision by the United States Securities and Exchange Commission (SEC) relaxing its stance on contentious crypto accounting regulations.
In a review earlier this year, the SEC’s Office of the Chief Accountant determined that BNY does not need to comply with the SEC’s Staff Accounting Bulletin (SAB) 121, which requires firms safeguarding client crypto assets to list them as liabilities in their accounting practices. This decision marks a significant step forward for the US crypto industry, as SAB 121 has been a source of frustration since its introduction in April 2022.
While BNY awaits approval from additional regulators, including the SEC, to commence offering custody services, the agency hinted that other financial institutions may also benefit from similar leniency. According to a spokesperson cited by Bloomberg, as long as customers receive adequate protection for their crypto assets, the balance sheet treatment for safeguarding these assets will be aligned with traditional custody arrangements.
The introduction of SAB 121 took many by surprise, causing confusion and mistakenly raising concerns about the financial health of companies like Coinbase, which incorporated the new accounting standards into its Q1 2022 financial report. Politicians later voiced their opposition, prompting a deeper examination of the guidelines by the Government Accountability Office, leading to a push for regulatory reform.
Despite mounting pressure and calls for exemptions from industry groups, the SEC initially maintained its stance on SAB 121. Legislation seeking to overturn the guidance was passed but subsequently vetoed by US President Joe Biden. Nevertheless, the evolving landscape of cryptocurrency regulation continues to impact various sectors, including the upcoming 2024 election, where crypto voters are poised to play a significant role in shaping policy and legislation.
