US Securities Regulator Opens Door for Wall Street Banks to Hold Crypto

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Wall Streets Securities Watchdog made it easier for banks to expand their cryptocurrency businesses by reversing a Joe Biden administration rule that made it prohibitive to hold digital assets.

In one of the first pro-Crypto moves of Donald Trumps second presidency, the Securities and Exchange Commission on Thursday reversed guidance known as SAB 121, which had called on institutions to deal with digital tokens held for customers as liabilities on balance sheets.

The change underscores expectations that Trump will take a much more welcoming approach toward the digital assets sector, reversing the more skeptical stance the SEC took during the Bidens administration.

Mainstream groups are taking a more serious look at crypto assets and technologies, with Blackrock chief Larry Fink this week calling for rapid approval of companies' ability to create tokens backed by stocks and bonds.

In a sign of a more favorable crypto strategy, the president had also issued an executive order outlining his priorities regarding cryptocurrencies and calling on cabinet-level officials to report back in several months with recommendations for regulatory and legislative proposals.

While Trump's pick to lead the SEC, Paul Atkins, still awaits U.S. Senate confirmation, acting Chair Mark Uyeda and another Republican commissioner, Hester Peirce, have put the regulator on a friendlier track, forming a task force and dismantles SAB 121.

SECS SAB 121 had created a punitive framework that effectively blocked U.S. banks from offering custody services for Bitcoin and other cryptocurrencies, said Mark Palmer, an equity research analyst at the benchmark firm. Traditional banks will now be able to offer crypto custody services without facing de facto penalties.

Even before the SEC took action, major U.S. banks were eagerly anticipating the ability to woo crypto customers as Trump and his allies in executive and legislative branches smoothed the path for digital assets.

We want to have the ability to offer spot crypto, and our expectation is that at some point the crypto regulations are going to allow us to do that, Rick Wurster, chief executive of Charles Schwab, told analysts on a call this week.

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Last year, the American Bankers Association and other industry lobbyists called on Biden to formally disapprove the SEC guidelines after measures to do so passed both houses of Congress in May 2024.

It's a step in the right direction, said Kevin Fromer, president of the Financial Services Forum, which represents the largest banks.

Brian Daly, attorney at Akin Gump, noted that custodial services are a be-all and end-all for financial institutions when offering crypto services to customers. The old rule essentially made it impossible for all banks and responsible brokers and financial intermediaries we rely on to become crypto custodians, Daly said.

Bitcoin's price rose more than 1.5% on Friday to around $105,800, shy of its all-time high of around $109,000.

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