You probably didn’t miss the Bitcoin (BTC) rally over the past few weeks. This also applies to several major banks and financial institutions in the United States.
The increase is most likely related to the new spot Bitcoin ETFs in the US that are going from strength to strength. The big banks now want to benefit from this.
American banks feel excluded from Bitcoin
A coalition of banks, including the American Bankers Association, the Bank Policy Institute, the Financial Services Forum and the Security Industry Financial Markets Association, jointly sent a letter to the Securities and Exchange Commission (SEC).
The coalition is lobbying regulators to relax crypto rules in the US so they can play an important role in this emerging market.
They sent a letter to SEC Chairman Gary Gensler demanding an adjustment to the definition of crypto assets. This could allow banks to benefit from the Bitcoin ETF hype.
The banks want to be called that Custodian bank, or custodian service that acts for the new Bitcoin ETFs. In the letter they explain that they are exempt from this:
“The Commission recently allocated 11 posts Bitcoin ETPs approved, giving investors access to this asset class through a regulated product.
Notably absent from these approved products, however, are banking organizations that act as custodians of the assets, a role they typically assume for most other ETPs.”
Banks are demanding rule changes to allow them to participate in crypto
They want guidelines introduced in March 2022 to be adjusted. According to the banks, several key developments have taken place in the crypto sector since then, including of course the approval of Bitcoin ETFs.
These rules require banks that, if they need to store cryptocurrencies, they must show them on their balance sheets, but this makes custody very expensive for banks.
The group has asked the American regulator to refine the rules around crypto so that regular financial products that use blockchain technology do not fall under strict crypto regulations.
For example, they want to prevent digitally converted bank deposits from being treated like pure cryptocurrencies.
They also propose exempting banks from the obligation to list cryptocurrencies directly on their balance sheets, but requiring them to be transparent about these assets.
The crypto world is of course enjoying this. Many banks have always stated that they will stay away from crypto, but with the approval of ETFs, it seems that they don’t want to miss the boat after all.