Big Banks Lobby SEC for Inclusion in Lucrative Bitcoin ETF Market
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On February 14, a coalition of major financial institutions in the US proposed a letter to SEC Chair Gary Gensler. The trade group wants the regulatory body to revise crypto asset definitions.
If accepted, this could enable them to serve as custodians for approved spot Bitcoin ETFs, expanding their role in crypto.
Big Banks Seek SEC Approval For Bitcoin ETF Opportunities
Major banks, such as the Bank Policy Institute, American Bankers Association, and others, are experiencing some fear of missing out on Bitcoin ETF opportunities.
Big banks are nudging the SEC for a slice of sweet Bitcoin ETF action
— Bradicoin (@Bradicoin10) February 16, 2024
As a result, their letter asked the SEC to review adjustments to Staff Accounting Bulletin 121 (SAB 121), released in March 2022. This document offers directives regarding the accounting treatment of obligations related to the custody of crypto assets.
The group mentioned that it has been two years since the issuance of the guidance, and there have been “several significant developments” during this time.
An example is the SEC’s recent approval of 11 Spot Bitcoin Exchange-traded products (ETPs). This move grants investors entry into this asset class through a regulated avenue.
However, notably absent from the approved products are banking institutions acting as asset custodians, a role they typically fulfill for most other ETPs.
The existing guidance mandates banks to maintain crypto assets on their balance sheets. The outcome is higher costs and hindrance to their ability to provide crypto custody services on a large scale.
Furthermore, significant inflows into Exchange-Traded Products (ETPs) pose challenges for banks to act as custodians due to regulatory requirements.
Regulatory guidelines like SAB 121 must also fully address this risk, especially concerning new products like Spot Bitcoin ETPs.
Therefore, the group has formally asked the SEC to refine the definition of cryptocurrency assets outlined in SAB 121. Moreover, the major focus should reflect excluding conventional assets documented on the blockchain.
Additionally, they propose exempting banks from on-balance sheet obligations while upholding disclosure requirements.
This adjustment would enable banks to participate in specific cryptocurrency endeavors while ensuring transparency for investors.
Banks Want Part Of The Share
In the past day, inflows into spot Bitcoin ETFs have exceeded miner production by more than tenfold.
Data from Farside, an investment company, indicates that as on February 15th, approximately $477.4 million (10,260 Bitcoin), had entered spot Bitcoin ETFs.
In contrast, Bitcoin miners generated approximately 38.549 BTC, valued at roughly $51,821 on the same day, according to Blockchain.com.
Meanwhile, Bitcoin investor Anthony Pompliano stated that Wall Street is increasingly embracing Bitcoin.” He made this remark on February 12th during an interview on CNBC’s Squawk Box.
He also highlighted that roughly 80% of the Bitcoin supply has remained stationary for six months. This adds to his suggestion that only about $200 billion worth of Bitcoin is actively traded.
However, these ETFs have absorbed 5% of the entire tradable supply of Bitcoin in just 30 days. Therefore, it is unsurprising that major banks are eager to participate in this market.
Matt Hougan, Chief Investment Officer at Bitwise, also noted the development in a post on X (formerly Twitter).
He stated that the move by these banks suggests Bitcoin ETFs have altered the regulatory discourse surrounding cryptocurrencies in Washington.
Meanwhile, Eric Balchunas, an ETF analyst at Bloomberg, highlighted that the aim of these financial institutions to partake in this rising sector can be justified. This is due to the potential for substantial market opportunities.
