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Lawmakers in the USA are discussing a resolution that would permit banks to hold crypto assets on behalf of their clients.
The House Financial Services Committee (HSFC) has approved a resolution that aims to reverse the United States Securities and Exchange Commission’s SAB 121 rule. It has prevented banks from offering crypto custody services.
What is Crypto Custody?
Crypto custody refers to the practice of storing private keys in an independent wallet that is not owned by a crypto exchange. Thus giving sole responsibility for protecting security and risk to the wallet’s owner.
Cryptocurrency solutions are self-governing security and storage environments created to store large volumes of crypto coins and tokens. The market may have seen institutional capital entering the cryptocurrency ecosystem with one of the latest developments in the space.
Benefits of Crypto custody
A crypto custody solution provides enhanced security, professional expertise, and seamless crypto payments. For instance, Cryptobunq’s custody and wallet service offers reliable cryptocurrency storage. Unlike online wallets that rely on private keys for access, cold storage ensures that your coins are never used as investments or liquidity for theft to occur.
However, successful custody offerings require advanced technology that provides strong security while maintaining speed, scalability, and operational flexibility. It necessitates dedicated custody solutions that are optimized for blockchain technology.
Votes in the Hearing Field of Feb 29
In a markup hearing held on Feb 29, 31 HSFC members from both sides of the political aisle voted in favor of the resolution, while 20 members voted against it. The House Financial Services Committee wants to remove barriers to consumer protection by allowing highly regulated banks to act as custodians of digital assets.
Republican congressman Mike Flood, who introduced the resolution, said that the guideline was unfair to banks interested in offering crypto custody, as custodial assets are “always considered off-balance sheet,” which includes securities and digital assets such as Bitcoin.
“If a bank were to custody digital assets according to the parameters of the guideline, the on-balance sheet treatment would affect their other regulatory obligations like their capital and liquidity requirements,” Flood added.
The resolution was introduced on Feb 1 by Flood and Democrat representative Wiley Nickel, arguing that the guideline went “beyond the scope of an accounting bulletin” and had effectively become a de-facto law.
The resolution still needs to pass a full floor vote in the House and the Senate before the guideline is thrown out. Crypto-friendly Republican Congressman Tom Emmer said at the markup hearing that the guideline was an “illegal” example of SEC Chair Gary Gensler’s “unrelenting prejudice towards the digital asset ecosystem.”
Emmer said the guideline introduced “unnecessary and avoidable” concentration risk into the crypto ecosystem. Democrat Congresswoman Maxine Waters, one of the lawmakers who voted against the resolution, said that the move to rescind the guideline was an “ironic” move from crypto-friendly politicians.
She said that they often hear Republicans and the crypto industry complain about a lack of clarity from the SEC, but ironically, the resolution before us effectively blocks the SEC staff from providing that clarity around crypto.
SABs are non-enforceable laws under the SEC’s purview. Instead, they are a series of non-binding guidelines used by SEC staff to help companies clarify how crypto firms should account for customer crypto holdings.
Summary
The House Financial Services Committee aims to allow highly regulated banks to act as digital asset custodians to remove consumer protection barriers. Crypto-friendly Republican Congressman Tom Emmer criticized the guideline as an “illegal” example of SEC Chair Gary Gensler’s “unrelenting prejudice towards the digital asset ecosystem.”
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos or any other related indexes comes with a risk of financial loss.
Amanda Shinoy is one of the few women in the space invested knee-deep in crypto. An advocate for increasing the presence of women in crypto, she is known for her accurate technical analysis and price prediction of cryptocurrencies. Readers are often waiting for her opinion about the next rally. She is a finance expert with an MBA in finance. Quitting a corporate job at a leading financial institution, she now engages herself full-time into financial education for the general public.
