Reuters Reports Major US Banks Suspend Crypto Lending Plans Amid Tough SEC Guidelines
U.S. Securities and Exchange Commission (SEC) guidelines on crypto custody could keep banks out of the industry due to the cost of implementation, Reuters reported on Sept. 16.
According to the report, SEC accounting guidelines state that public companies holding crypto assets on behalf of their clients should recognize those assets as liabilities due to the high level of risks associated with the industry.
This focus, however, poses a major problem for banks looking to offer crypto custody services.
Banking regulations include strict capital rules, which require banks to hold cash to cover all liabilities on their balance sheets.
Banks trying to offer crypto custodial services to their customers would need more cash on hand as crypto assets will be reported as liabilities. This could prove too costly for many of these banks, forcing them to put their crypto product offering plan on hold.
So far, banks like Bancorp and State Street are reconsidering their digital asset offerings because of the costs.
State Street Digital head Nadine Chakar said:
“We have a problem with the premise of doing this because it’s not our assets. It shouldn’t be on our balance sheet.
A Bancorp spokesperson revealed that the bank has stopped accepting new clients for its crypto custody services due to regulatory requirements.
Reuters, citing unnamed sources, said the SEC did not consult with banking regulators before issuing the guidelines, with one source saying:
“Lenders building crypto offerings have had to ‘stop moving forward with those plans pending further action from the SEC and banking regulators.’
While the SEC has attempted to justify its guidance on several occasions, stakeholders such as US Representative Trey Hollingsworth, the American Bankers Association, the Bank Policy Institute and the Securities Industry and Financial Markets Association have challenged it.
According to lenders, the SEC is using its directive to prevent banks from getting involved in crypto custody services.