Industry Coalition Calls for Accounting Changes

Leading financial advocacy groups are stepping up to challenge the Securities and Exchange Commission (SEC) on the current accounting practices for crypto assets held in custody. These organizations, which include prominent bodies like the American Bankers Association and the Securities Industry and Financial Markets Association, are pushing for a revision of rules to alleviate the financial strain on American banks.

Congressional Support for Regulatory Overhaul

The movement for change has garnered bipartisan support from Congress members, who are in favor of overturning the stringent accounting standards. This collaborative effort aims to ease the operational challenges faced by banks in the rapidly evolving crypto landscape.

The Impact of Current SEC Guidelines on Banks

As per existing SEC regulations, public financial entities are required to report the crypto assets they hold for clients as liabilities. This necessitates that banks hold a corresponding amount of assets to cover any potential losses, which in turn affects their capital requirements and financial stability.

A Proposal for Exemption and Clarity

The coalition’s communication with the SEC includes a proposal to narrow down the definition of cryptocurrencies. They suggest excluding certain assets, particularly those that are documented or transferred via blockchain technology, like tokenized deposits. Additionally, they propose that tokens associated with SEC-approved products, such as spot Bitcoin ETFs, should also be exempt from being classified as cryptocurrencies.

Recommendations for Regulated Institutions

The industry groups are advocating for regulated banks to be exempt from listing crypto holdings as liabilities on their balance sheets. However, they stress the importance of transparent disclosure of all crypto-related activities within financial reporting.