Originally published on: September 24, 2024
As the United States Securities and Exchange Commission (SEC) eases its stance on the controversial crypto accounting guidelines outlined in Staff Accounting Bulletin (SAB) 121, the Bank of New York (BNY) is poised to offer custody services for Bitcoin and Ether to its exchange-traded fund (ETF) clients.
SEC Gives BNY a Pass on SAB 121
The SEC’s Office of the Chief Accountant recently reviewed BNY’s position and determined that the bank is not obligated to comply with SAB 121, a development that has significant implications for the US crypto industry. This decision paves the way for BNY to safeguard client crypto assets without listing them as liabilities in their accounting practices.
Opportunities for Other Financial Institutions
According to a Bloomberg report, the SEC’s leniency towards BNY could signal a broader shift in regulatory approach towards crypto custody among financial institutions. The agency indicated that as long as customers receive equivalent protection for crypto assets as they do in traditional custody arrangements, the balance sheet treatment will remain consistent with custody services.
Regulatory Hurdles and Industry Response
While BNY awaits additional regulatory approvals to formalize its crypto custody services, the industry continues to grapple with the aftermath of SAB 121. The stringent guidelines introduced challenges for companies like Coinbase, leading to erroneous speculation about their financial stability due to the revised accounting practices.
Political and Industry Pushback
The introduction of SAB 121 sparked widespread criticism and calls for reform within the crypto community and among politicians. Senator Cynthia Lummis and a coalition of banking organizations urged the SEC to reconsider the application of SAB 121 to blockchain-based assets, citing concerns about regulatory overreach and its impact on innovation.
Future Outlook and Industry Impact
As the regulatory landscape evolves and stakeholders advocate for clearer guidelines, the industry anticipates further developments in crypto custody practices. The interplay between regulatory oversight, market demand, and technological innovation will shape the future of crypto asset management within the financial sector.
Crypto Voters Reshape the 2024 Election Landscape
In a separate but related development, crypto voters have emerged as a significant constituency with the potential to influence the upcoming 2024 election. Their engagement with regulatory issues, like SAB 121, underscores the growing intersection between technology, finance, and policymaking in shaping the digital economy.
