The US Securities and Exchange Commission (SEC) has eased the crypto reporting rules for banks and brokerages. The regulator agreed to allow banks to bypass crypto holdings balance sheet reporting as long as they protect users’ assets against bankruptcy.
This development comes after the US House failed to override Biden’s veto of the SAB 121 accounting rule.
SEC Relaxes Crypto Reporting Rules For Financial Institutions
A Bloomberg July 12 report, citing a source familiar with the matter, disclosed the US securities regulator has eased the pathway for banks and brokerages to include crypto services to their customers
According to the report, banks and brokerages can bypass reporting their clients’ crypto holdings on balance sheets. However, for this to happen, the institutions must meet certain conditions to mitigate associated risks.
This move came amid the controversial SAB 121 accounting rule that remains debatable in Congress.
Notably, accounting rules demand that financial institutions record crypto funds as long-term intangible assets. They will also list the assets on their balance sheets, indicating their original purchased value.
In addition, the rules expect the institutions to conduct regular checks on the assets and update potential declines in value.
Since last year, some prominent financial institutions and banks have consulted the agency regarding the accounting rule. So, the regulator is obliged to ease the accounting requirements.
One of the conditions for bypassing the crypto reporting rule is that institutions should protect their client’s funds in the event of failure or bankruptcy.
Also, the regulator expects the companies to ensure measures to handle threats from hacks and business failures.
Could Relaxed Crypto Rules Extend To Crypto Firms?
Before now, the accounting rules deterred banks and other financial institutions from offering cryptocurrency services. The new development provides more options for crypto holders in the US to store their crypto assets.
While the SEC eased its reporting rules for banks and brokerages, it didn’t extend to crypto-focused firms. So, the reporting rules still apply to other US crypto-related companies that offer customers crypto services.
Moreover, lenders lamented that strict accounting rules prevent them from offering crypto services. They pointed out that posting huge balance sheets in their reports will attract banks’ capital requirements.
The new SEC’s ease on crypto reporting rules came after Congress failed to overturn Biden’s veto on SAB 121. The regulator promulgated the Staff Accounting Bulletin No. 121 (SAB 121), which demands the reporting of customers’ crypto holdings.
Banks and other financial firms have requested Congress’ intervention to overturn the SAB 121 rules.
On Thursday, July 11, the US House of Representatives voted to override the president’s veto of the reporting rule. Most members voted for the overturn, but the House failed as the vote fell short of the required two-thirds majority.
So, President Biden’s veto remains functional, keeping SAB 121 viable for crypto-related companies.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
Our Editorial Process
The Tech Report editorial policy is centered on providing helpful, accurate content that offers real value to our readers. We only work with experienced writers who have specific knowledge in the topics they cover, including latest developments in technology, online privacy, cryptocurrencies, software, and more. Our editorial policy ensures that each topic is researched and curated by our in-house editors. We maintain rigorous journalistic standards, and every article is 100% written by real authors.
