US Banks Lobby for Changes to Entry into Bitcoin ETF Market

By: Eva Baxter

A consortium of US banking groups, which includes the American Bankers Association, the Securities Industry and Financial Markets Association, and the Financial Services Forum, are advocating for a rule change to facilitate their participation in the Bitcoin ETF landscape. They urge the SEC to reassess the regulations that have made it costly for these banks to offer crypto custody services. Current rules require these financial institutions to classify cryptocurrencies as liabilities on their balance sheets and allocate equivalent assets against potential losses.

At present, Coinbase, a leading US-based crypto trading platform, accounts for over 90% of all Bitcoin ETFs in America. This effectively makes Coinbase a dominant player in the Bitcoin ETF market. The banking consortium contends that the current rules lend to this concentration risk and are asking for banks to be allowed to offer custodial services for SEC-regulated ETFs. Additionally, they are urging the SEC to refine how crypto is defined in order to exclude traditional financial assets that are recorded or transferred on blockchain networks.

These developments come in the wake of Coinbase's fourth-quarter earnings, which were strengthened by the launch of ten spot Bitcoin ETFs. Coinbase's successes have made it a major player in facilitating the adoption of cryptocurrencies by traditional financial firms, further emphasizing the need for increased participation by more regulated banking organizations to better serve investors and customers.