Travis Hill, the Vice Chair of the Federal Deposit Insurance Corporation (FDIC), has aired a lot of criticism concerning the Securities and Exchange Commission’s (SEC) crypto accounting guidelines. He gave his comments during a speech at an event organized by the Mercatus Center, dedicated to the subject of tokenization. The critique is based upon the SEC’s Staff Accounting Bulletin (SAB) 121, which requires that firms that custodian cryptocurrencies to record the crypto holdings of their customers as liabilities on their balance sheet.

Departure from Traditional Custodian Practices

Hill noted that SAB 121 indicates a major departure from the existing custodian accounting practices. Custodial assets in financial institutions have been traditionally excluded from their balance sheets but regarded as the customers’ proprietary assets. The treatment ensures that ownership rights and financial liability are clear. 

Nevertheless, under SAB 121, cryptos under custody would be considered differently hence, banks’ willingness and ability to provide custody services for digital assets would also be affected. The bulleting, which was published in March 2022, has ignited fears within the cryptocurrency community that it could influence the banking sector’s involvement with digital assets.

Impact on Bitcoin ETFs and the Market

The Vice Chair of the FDIC also pointed out the implications of the SEC’s bulletin on spot bitcoin exchange-traded funds (ETFs) that the SEC had approved earlier in the year. Some legislators have suggested that the announcement might bar banks from being the custodians for such ETFs, thus restricting investors from the opportunity to have safe and regulated custody services. 

Hill was skeptical of the public interest in letting a single crypto exchange reign over custody services for approved bitcoin exchange-traded products, while “highly regulated banks are effectively excluded from the market.”

Additionally, Hill pointed out to the SEC’s criticism for having a very broad definition of crypto assets, which might include tokenized versions of real-world assets, and proposed that the regulator needs to provide more clarity and specificity in the regulatory guidance. He supported a positive approach that would entail the agencies in eliciting the public comments before they issued the major policy directives and in most cases, it would result in balanced and effective regulations.

Calls for Clarity and Legislative Review

The dispute about SAB 121 has resulted in legislative initiatives to nullify the bulletin. This was demonstrated when the House Financial Services Committee voted to move a resolution to this particular effect, thus showing a bipartisan fear over the bulletin’s implications. This legislative oversight comes after a Government Accountability Office statement indicating that Congress must review the bulletin before it goes into effect.

Hill’s critique highlights a wider request for regulatory transparency and cautious digital assets integration into the conventional banking system. He stressed the need to appreciate the implications of disruptive technologies such as blockchain and distributed ledger technology on banking and financial services. Moreover, there is a push for regulators to balance innovation with consumer protection and financial stability.

Read Also: Blackrock Brings Ethereum ETF Enthusiast on Board to Focus on Crypto Offerings

The post FDIC Vice Critiques SEC’s Crypto Guide, Cites Major Concern appeared first on CoinGape.

Earn more CFN tokens by sharing this post. Copy and paste the URL below and share to friends, when they click and visit Parrot Coin website you earn: https://cryptoforum.news0

CFN Comment Policy

Your comments MUST BE constructive with vivid and clear suggestion relating to the post.

Your comments MUST NOT be less than 5 words.

Do NOT in any way copy/duplicate or transmit another members comment and paste to earn. Members who indulge themselves copying and duplicating comments, their earnings would be wiped out totally as a warning and Account deactivated if the user continue the act.

Parrot Coin does not pay for exclamatory comments Such as hahaha, nice one, wow, congrats, lmao, lol, etc are strictly forbidden and disallowed. Kindly adhere to this rule.

Constructive REPLY to comments is allowed