The US Securities and Exchange Commission (SEC) appears determined to maintain its position on a rule limiting crypto custody services for regulated financial firms.
In an X post on September 10, 2024, ETF Store President Nate Geraci stated that the SEC “appears to be firmly committed” to SAB 121.
“They simply don’t want to provide regulated financial institutions with the ability to custody crypto”,
he wrote.
Geraci’s comments follow an address by SEC Chief Accountant Paul Munter at a banking conference on September 9, 2024, where he discussed the regulatory stance on accounting for crypto assets, with a focus on the agency’s Staff Accounting Bulletin No. 121 (SAB 121) and its applications.
“The [SEC] staff’s views in SAB 121 remain unchanged,” Munter said.
The SEC created SAB 121 in March 2022 to explain how financial institutions should handle crypto assets. The rule created political disagreement by stopping banks and regulated financial institutions from holding cryptocurrency for their customers.
RELATED: Crypto Industry Supporters Raise Concerns Over SEC’s Proposed Custody Regulation
According to Munter, the SEC still believes that entities with crypto assets custody arrangements should recognize a liability on their balance sheets for digital assets as the SAB 121 guidelines requires.
Munter, however, noted that the SEC had assessed different accounting scenarios related to blockchain and crypto assets and recognized that not all arrangements comply with the proposed guidelines outlined in SAB 121. According to him, companies holding crypto assets with bankruptcy protection may not be required to report a liability on their balance sheets. Additionally, “broker-dealers” that facilitate cryptocurrency transactions but do not control the cryptographic keys may not be required to record liabilities.
Notably, SEC Commissioner Hester Peirce, who has been outspoken against the rule, stated on X that she still has concerns about the SAB 121 content and how it was developed.
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