Wall Street’s securities watchdog has made it easier for banks to expand their cryptocurrency businesses by overturning a Biden administration rule that made it prohibitively expensive to hold digital assets.
In one of the first pro-crypto moves of Donald Trump’s second presidency, the Securities and Exchange Commission late on Thursday reversed guidance known as SAB 121, which had called for institutions to treat digital tokens held for customers as liabilities on balance sheets.
The shift underscores expectations that Trump will take a far more welcoming approach towards the digital asset sector, undoing the more sceptical stance the SEC took during Joe Biden’s administration.
Mainstream groups are already taking more serious interest in crypto assets and technologies, with BlackRock chief Larry Fink this week calling on the SEC to “rapidly approve” the ability of firms to create tokens backed by stocks and bonds.
In a sign of Trump’s more supportive crypto strategy, the president on Thursday had also issued an executive order laying out his priorities regarding cryptocurrencies and calling for cabinet-level officials to report back several months from now with recommendations for regulatory and legislative proposals.
While Trump’s pick to lead the SEC, Paul Atkins, is still awaiting US Senate confirmation, acting chair Mark Uyeda and another Republican commissioner, Hester Peirce, have put the regulator on a more crypto-friendly track, forming a task force and dismantling SAB 121.
SAB 121 had “created a punitive framework that effectively prevented US banks from offering custody services for bitcoin and other cryptocurrencies”, said Mark Palmer, an equity research analyst at The Benchmark Company. “Traditional banks will now be able to offer crypto custody services without facing de facto penalties.”
Even before the SEC took action, big US banks were eagerly anticipating the ability to court crypto customers as Trump and his allies in the executive and legislative branches smoothed the road for digital assets.
“We do want to have the ability to offer spot crypto, and our expectation is that at some point, the regulations around crypto are going to allow us to do that,” Rick Wurster, chief executive at Charles Schwab, told analysts on a call this week.
The American Bankers Association and other industry lobbyists last year called on Biden to formally disapprove of the SEC guidance after measures to do so passed both houses of Congress in May 2024.
“This is a step in the right direction,” said Kevin Fromer, president of the Financial Services Forum, which represents the biggest banks.
Brian Daly, a lawyer at Akin Gump, noted that custody services were “a predicate to everything” for financial institutions when offering crypto services to customers. The old rule “basically made it impossible for all the responsible banks and broker-dealers and financial intermediaries that we rely on to be crypto custodians”, Daly said.
The price of bitcoin rose more than 1.5 per cent on Friday to about $105,800, shy of its all-time high of around $109,000.