Are the current regulations on Bitcoin ETFs on the verge of a major overhaul? This is the wish of a group of American banks which recently invited the president of the SEC to review certain measures concerning the regulation of these assets. Details in the rest of this article.
A call for a review of Bitcoin ETF regulations
A coalition of American banks sent a letter to Gary Gensler on February 14 to notify him of their desire to actively participate in the Bitcoin ETF market. Among the banking institutions that form this alliance, we find the Bank Policy Institute, the American Bankers Association and the Securities Industry and Financial Markets Association.
These banks notably view capital and reserve requirements as constraints that do not allow them to offer Bitcoin ETF custody services. A role that they play for most other exchange traded products (ETPs). In his letter, the coalition warns against the risks this represents for investors and the financial system. According to her, if regulated banking institutions fail to provide asset custody services, investors will turn to providers who cannot offer them the necessary legal protections.
In addition, the coalition warns of the risk of hegemony, if a single non-bank actor comes to dominate the custody services for these Bitcoin ETFs. It implicitly refers to Coinbase, the largest crypto exchange based in the United States, which is indeed the custodian of assets for eight Bitcoin ETF issuers.
The reform proposals formulated by the banks
If it highlighted the flaws in the current regulations on Bitcoin ETFs, the coalition did not fail to propose possible solutions for a favorable outcome. It calls on the SEC to revise the definition of cryptocurrencies in Staff Accounting Bulletin 121 (SAB 121) to exclude traditional financial assets recorded or transferred on blockchain networks.
This distinction would make it possible to exempt banks from asset accounting requirements while maintaining disclosure obligations, thus promoting transparent participation of these institutions in certain crypto activities. This approach seeks to balance the need for transparency for investors with the desire to integrate banks into the digital asset ecosystem in a more meaningful way.
While waiting for the SEC’s response, the banks’ proposals have caused several crypto industry analysts to react. Standing by this letter, Matt Hougan, Chief Investment Officer at Bitwise suggests that Bitcoin ETFs could push US authorities to reconsider their position regarding the regulation of cryptos in general.
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