The Bank of New York Mellon (BNY) is making progress in offering custody services for Bitcoin and Ether to its exchange-traded fund (ETF) clients. This comes after the United States Securities and Exchange Commission (SEC) granted the bank an exemption from adhering to the controversial crypto accounting guidelines outlined in the SEC’s Staff Accounting Bulletin (SAB) 121.
The SEC’s Office of the Chief Accountant conducted a review earlier this year and determined that BNY did not need to follow SAB 121, which requires companies to list client crypto assets as liabilities in their accounting. This guideline has been a cause of concern for the US crypto industry since it was introduced in April 2022.
The SEC hinted that other financial institutions may also receive similar exemptions, as long as they provide the same level of protection for safeguarding crypto assets as they do for custody arrangements. BNY would still need authorization from other regulators in addition to the SEC before it can offer custody services.
SAB 121 has been a contentious topic, causing widespread controversy. Coinbase’s Q1 2022 financial report led to false speculations about the company’s financial stability due to the incorporation of the new accounting. In June 2022, politicians expressed their concerns about the regulation disguised as staff guidance in a letter to SEC Chair Gary Gensler.
At the urging of pro-crypto Senator Cynthia, the Government Accountability Office examined the guidance and determined in October 2023 that SAB 121 was subject to the Congressional Review Act. This act requires agency rules to be submitted to Congress with a procedure for disapproval.
In February, a coalition consisting of the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association sent a letter to Gensler requesting an exemption for traditional assets recorded on the blockchain from the requirements of SAB 121.
Despite the pressure, the SEC remained firm on the guidance, and legislation aimed at overturning it was passed in May. However, US President Joe Biden vetoed the legislation the following month.
Magazine: Crypto voters are already disrupting the 2024 election — and it’s set to continue.