SEC permits limited exceptions for cryptocurrency accounting compliance.

TLDR:

• The SEC is allowing banks and brokerages to bypass reporting their customers’ crypto holdings on their balance sheets.
• Companies must protect these assets to avoid following controversial crypto accounting guidelines.

Key Elements of the Article:

The Securities and Exchange Commission (SEC) has opened a path for banks and brokerages to avoid reporting their customers’ crypto holdings on their balance sheets. This decision comes as a response to controversial crypto accounting guidance that has faced opposition in Congress. The SEC has allowed certain arrangements to be exempt from reporting liabilities on the balance sheet, as long as the assets are adequately protected in the event of bankruptcy or failure.

The SEC believes that companies have adjusted their practices to address risks associated with crypto assets, such as hacking and business failures. This change in accounting stance may expand the range of services offered by traditional financial institutions to include storing crypto portfolios. Lenders have previously faced restrictions because reporting crypto holdings would trigger capital requirements set by banking regulators.

Despite calls from industry groups to rescind the staff guidance, the House failed to override a presidential veto, leaving the measure in place. Companies like Coinbase Global Inc. and Robinhood Markets Inc. have been reporting the value of their customers’ crypto assets on their balance sheets. However, following closed-door consultations, banks have argued successfully that certain crypto assets like wallets and spot Bitcoin exchange traded products should be exempt from the crypto guidance.

Financial institutions are eager to enter the crypto industry, especially with the approval of spot Bitcoin products by the SEC. This decision opens up opportunities for traditional financial institutions to participate in the growing crypto market.