US SEC’s Crypto Guidelines Increase Costs For Lenders

The accounting guidance from the US Securities and Exchange Commission (SEC) has upended the cryptocurrency projects of banks.

According to people with knowledge of the matter, this is because the guidance would make it too capital-intensive for banking institutions to hold crypto assets on behalf of their customers.


According to media reports and their public statements, there are a number of prominent banks that are offering, or working on offering crypto products and services to their clients.

After all, all these lending institutions also want to tap into the crypto market, which is worth $1 trillion now and had reached $3 trillion at its peak last year.

These names include Deutsche Bank, BNY Mellon, Goldman Sachs Group Inc., BNP Paribas, Wells Fargo & Co, JP Morgan Chase & Co, State Street Corp, and US Bancorp.

However, the SEC had stated on March 31st that public companies holding crypto tokens for their clients have to list them in their balance sheets under liabilities because of their regulatory, legal and technological risks.

While this guidance applies to all public companies, it is very problematic for lenders because bank regulators oversee their capital rules.

Therefore, they have to have cash against the liabilities in the balance sheet. When issuing this guidance, the SEC had not consulted with any banking regulators.


The move of the SEC will only add complications to the efforts of banking institutions to jump onto the crypto bandwagon.

As a matter of fact, it could even push them to the sidelines because there is a rising demand from clients who want to get access to the burgeoning industry.

One of the sources said that the SEC’s guidance had thrown a huge wrench into the plans of lenders. Those working on crypto offerings had to cease their plans due to the risk of regulatory action.

Custody banks

According to the sources, the biggest impact of the SEC guidance has been on custody banks, such as BNY Mellon and State Street.

This is because these banks were working on their digital asset offerings and now these projects have been disrupted.

Even though State Street can continue offering crypto custody services even after the accounting guidance of the SEC, it does make it uneconomical.

The head of State Street Digital said that adding the crypto assets they keep on behalf of their clients to their balance sheets does not make sense because they do not own them.

As for BNY Mellon, a representative only said that the digital assets are not going anywhere and they are on course to become a part of mainstream finance.

A spokesperson for US Bancorp said that after the SEC guidance, they were still offering bitcoin custody services to existing clients, but were no longer taking on new ones until they evaluate the regulatory environment.

It is clear that the SEC guidance will make it cost prohibitive for a number of banks to introduce crypto custody services because they would have to have a lot of capital.

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