Reuters reports major US banks pausing crypto lending plans amid challenging SEC guidelines

U.S. Securities and Exchange Commission (SEC) guidance on cryptocurrency custody could deter banks from industry due to implementation costs, Reuters report September 16th.

Due to the high level of risk associated with the industry, public companies holding crypto assets on behalf of their clients should account for such assets as liabilities, according to the report. .

However, that guidance poses major problems for banks looking to offer cryptocurrency custody services.

Banking regulations include strict capital requirements, requiring banks to hold cash for all liabilities on their balance sheets.

Banks looking to offer crypto custody services to their clients will need to keep more cash on hand as crypto assets are reported as liabilities. This could prove to be too costly for many of these banks and force them to suspend their plans to offer cryptocurrency products.

So far, banks such as Bancorp and State Street are reconsidering their digital asset offerings due to cost.

Nadine Chakar, Head of State Street Digital, said:

“The premise of doing that is problematic because these are not our assets. This should not be on our balance sheet.”

A Bancorp spokesperson revealed that the bank has stopped accepting new customers for its cryptocurrency custody service due to regulatory requirements.

Reuters, citing unnamed sources, said the SEC did not consult banking regulators before issuing the guidance.

“Lenders building cryptocurrency offerings have had to stop moving forward with these plans pending some additional action from the SEC and banking regulators.”

The SEC has attempted to justify its guidance on several occasions, but it has been questioned by stakeholders such as U.S. Congressman Trey Hollingsworth, the National Bankers Association, the Institute for Banking Policy, and the Securities Industry and Financial Markets Association. increase.

Lenders say the SEC uses its guidelines to prevent banks from engaging in crypto custody services.