SEC will allow certain financial institutions to exclude cryptocurrencies from their balance sheets as liabilities: new opportunities for banks.
On July 12, the US SEC authorized certain financial institutions to exclude customer cryptocurrency holdings from their balance sheets, provided that specific security requirements are met.
This decision marks a departure from the previous approach outlined in Staff Accounting Bulletin No. 121 (SAB 121). The current SAB 121 guidelines require companies holding cryptocurrencies to record customer assets as liabilities on their balance sheets, discouraging banks from offering services related to digital assets.
Details of the agreement
According to Bloomberg reports, this modification follows confidential negotiations between the SEC and several major financial institutions. To avoid the obligation of reporting cryptocurrencies on their balance sheets, companies must implement specific security measures to protect assets in case of bankruptcy and enforce rigorous internal controls. The SEC believes these measures are necessary to mitigate risks associated with cryptocurrencies, such as hacking and corporate failures, which could jeopardize investors’ assets.
Updating the guidelines could facilitate banks and financial institutions entering the digital asset market, enabling them to offer trading and custody services to their clients.
