Big US Banks Pressure SEC To Change Rules So They Can Be Custodians For Bitcoin ETF Assets

Updated: 16 February 2024

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Big US banks are pushing the Securities and Exchange Commission (SEC) to change existing rules to make it possible for them to hold digital assets on behalf of Bitcoin ETF customers.

In a letter dated February 14, several leading financial firms in the US urged the SEC Chair, Gary Gensler, to change the definition of crypto assets. Doing so will allow these firms to venture deeper into the crypto industry as custodians for digital assets.

US Banks Complain Of Missing Out On Spot Bitcoin ETFs

The letter said that US banks are missing out on custody business from the recently approved spot Bitcoin exchange-traded funds (ETFs).

US banks, left off key bitcoin ETF roles, are pushing SEC to tweak guidance around holding digital assets. A bank trade gp coalition sent SEC letter asking them exclude ETFs from broad crypto umbrella. They want a piece of the action. I don't blame them, it isn't fair.… pic.twitter.com/advPa94nK2

— Eric Balchunas (@EricBalchunas) February 15, 2024

Banks cannot serve as asset custodians to Bitcoin ETFs because of the Staff Accounting Bulletin 121 (SAB 121) guideline issued in March 2022.

The SAB 121 guideline mandates banks to hold cryptocurrencies on their balance sheet. Doing this is an expensive affair and prevents banks from exploring crypto asset custody.

The banks now want the SEC to consider modifications to the guidelines. They request that banks be exempted from holding crypto on their balance sheets. Instead, the SEC should require them to offer disclosures when engaging in crypto activities to maintain transparency, the letter said.

The banks also said SAB 121 guidelines were outdated as they were formulated before the approval of spot Bitcoin ETFs.

Bitcoin ETF Inflows Surge

Spot Bitcoin ETFs have hit positive net flows of $4.5 billion since launch, while the ETFS offered by BlackRock and Fidelity attracted more assets during their first month of trading than any other ETF launched in the US in the last three decades.