Banks Have Green Light to Hold Crypto After SEC Axes Rule
The Securities and Exchange Commission has scrapped a controversial accounting rule requiring companies to record crypto assets held for clients on their balance sheets, opening the door for more traditional banks to enter the crypto custody business.
of Repeal of Staff Accounting Notice 121 It marks a turning point in how financial institutions approach crypto holdings, which industry experts say could strengthen the industry and expand institutional crypto services beyond bitcoin and ethereum.
“Several large custodians such as USBank and BNY provide fund management and financial protection for crypto ETFs. BNY also has the technical ability to hold Bitcoin and Ethereum,” Canary Capital CEO and Founder Steven McClurg told etf.com.
The removal of SAB 121 will allow traditional escrow providers to expand their crypto ETF services globally, McClure said, adding that he expects the consolidation of the industry to be bought by banks with crypto-native companies like Gemini or Anchorage.
However, McClure said the transition won’t happen overnight. Most banks limit their protection services to Bitcoin and Ethereum, which means the next wave of crypto ETFs—including XRP, Litecoin, and HBAR—may not have bank protection support when they launch.
While some ETF issuers may move their products to bank custody services for convenience, McClure explained, “It will still take years for most banks to get comfortable with their own technology systems, but M&A will accelerate that.”
The regulatory change outlined in Staff Accounting Bulletin 122 requires companies to assess crypto-security obligations under broader accounting standards, such as US generally accepted accounting principles and International Financial Reporting Standards.
The new guidance will be effective for fiscal years beginning on or after December 15, 2024, although companies may adopt the changes earlier. The SEC emphasized that companies should continue to provide clear disclosures about their crypto custodial obligations under existing requirements.
The change follows a series of congressional attempts to meet accounting requirements. Bilateral A bill to repeal SAB 121 Last year, it received initial support in both chambers but was rejected by then-President Joe Biden.