Guidance issued by the U.S. Securities and Exchange Commission on how lenders should treat customers' digital assets is disrupting the banks' crypto projects, Reuters reported, citing people familiar with the matter.
In March, the SEC said all U.S.-listed public companies that function as crypto custodians should account for their crypto exposure as liabilities instead of assets on their balance sheets and disclose risks associated with those liabilities to investors. The custody of crypto assets by lenders presents unique technological, legal and regulatory risks compared with other assets, the SEC guidance said.
The Basel Committee on Banking Supervision, the global standard setter for banking regulation, is planning to issue international rules for banks exposed to crypto, including strict capital requirements and exposure caps. The Basel committee's upcoming standards combined with the SEC guidance could drive U.S. banks further away from participating in digital-asset markets.
Accounting for crypto held on behalf of their clients as liabilities is particularly harsh on banks because they are required to hold cash to match liabilities on their balance sheets, according to the report published on Friday.
U.S. Bancorp (USB) told Reuters it was pausing the intake of new crypto clients until it evaluates the "evolving regulatory environment," while investment bank BNY Mellon (BK) declined to comment on the status of its crypto projects.
An unnamed European bank looking to offer crypto custody services in the U.S. was quoted in the report as saying it would be "prohibitively costly" to do so under the new guidance.
Crypto custody specialist Anchorage Digital told Reuters that all banks working with the firm are "now waiting on regulators before proceeding to work with Anchorage on crypto custody solutions."
BNY Mellon, U.S. Bancorp, and Anchorage Digital didn't immediately respond to CoinDesk's requests for comment.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.