The SEC’s crypto guidance is causing U.S. banks to reevaluate custody projects

A report says that the advice the SEC has given about cryptocurrencies is making banks in the United States rethink their cryptocurrency custody projects. According to the governing body, financial institutions should consider their customers’ cryptocurrency assets to be liabilities. This might make managing these assets “extremely expensive” for banks.

People who know about the topic told Reuters that the advice given by the U.S. Securities and Exchange Commission about how banks should handle their customers’ digital assets is making it hard for banks to work on projects related to cryptocurrencies.

The Securities and Exchange Commission (SEC) issued a statement in March mandating that all U.S.-listed public companies that act as custodians for cryptocurrencies should record their exposure to cryptocurrencies on their balance sheets as liabilities rather than assets and inform investors about the risks associated with these liabilities. According to the statements made by the SEC, the technological, legal, and regulatory risks associated with crypto assets are distinct from those associated with other assets.

The Basel Committee on Banking Supervision, which is in charge of determining global guidelines for the regulation of banks, is looking to implement stringent capital requirements and exposure limitations for financial institutions that deal with cryptocurrencies.

The upcoming rules from the Basel committee and the SEC’s suggestions could make it much less likely for U.S. banks to take part in markets for digital assets.

If banks count the cryptocurrency they hold for their customers as a liability, a report that came out on Friday says they will have to keep cash on hand to match their liabilities on their balance sheets. According to Reuters, U.S. Bancorp (USB) has stated that it will halt the onboarding of new bitcoin clients until it has had the opportunity to review the “changing regulatory landscape.” On the other hand, investment bank BNY Mellon (BK) would not say anything about where its cryptocurrency projects are at the moment.

According to the report, an unnamed European bank that said it was interested in providing cryptocurrency custody services in the U.S. said that doing so would be “prohibitively expensive” under the new rules.

According to Anchorage Digital, a business that specialises in cryptocurrency custody, all of the banks that cooperate with the company are “currently waiting for regulators” before moving forward with cryptocurrency custody solutions with Anchorage.