SEC Relaxes Crypto Reporting Rules for Banks and Brokerages

cryptonews.com:

The US Securities and Exchange Commission (SEC) announced new exemptions on July 11, freeing banks and brokerage firms from reporting customers’ crypto holdings on financial statements.

This regulatory relief, however, hinges on a crucial condition: financial institutions must prove their ability to manage digital asset risks effectively.

Bloomberg reports that the US SEC has begun issuing guidance clarifying that some crypto-related arrangements might not qualify as liabilities for financial statement reporting purposes.

This shift holds particular significance for large banks engaged in consultations with the SEC since 2023. These institutions have secured conditional approval to bypass the reporting requirement, contingent upon their ability to guarantee the safeguarding of customer assets in bankruptcy scenarios.

Several large banks have got the green light from SEC staff to bypass strict balance sheet reporting requirements on crypto by ensuring their customers’ assets would be protected in the event of a bankruptcy or failure, per @Aiacone https://t.co/6lyELKnOeu

— Emily Nicolle (@emilyjnicolle) July 11, 2024

The SEC’s recent move to relax crypto reporting rules comes two years after the introduction of its controversial SAB 121 guidance. This guidance sought to enhance transparency and risk management within the dynamic crypto landscape.

Under SAB 121, custodial obligations were to be recognized as liabilities on balance sheets, accompanied by comprehensive disclosures regarding associated risks.

SAB 121’s implementation, however, sparked considerable controversy. Industry stakeholders viewed the regulation as exceeding the SEC’s authority, asserting it placed undue burdens on businesses and hindered innovation.

Critics