9th May 2024 > > SAB 121, HSFC, & the SEC.

tl;dr

SAB 121 is voted out of existence, but a Presidential veto will ensure this deliberate roadblock to crypto adoption is allowed to live on. Gensler gets grilled again.

Market Snap

Market Wrap

Two months of sideways movement doesn’t look like it’s going to change anytime soon.

Curious Cryptos’ Commentary – SAB 121

In March 2022, the SEC introduced SAB 121, a piece of regulation that effectively bars banks in the US from providing crypto custodial solutions to their clients.

For all other assets, banks that custody assets do not carry those assets on their balance sheet, for obvious reasons. They have no market-risk exposure. This is simply a service that is a vast improvement on individuals and corporations storing paper documents proving ownership in a filing cabinet at home or in an office.

SAB 121 demands that banks keep custodial cryptos on balance-sheet with a 100% capital charge. This doesn’t “ban” banks from providing crypto custody, but makes it prohibitively expensive to offer this service. Its sole intention is to prevent banks from entering the crypto space, whilst jettisoning any pretence of client protection, which just happens to be the SEC’s core mission.

On the 18th February the CCC reported that a bi-partisan bill had been introduced to overturn SAB 121, an extraordinary development on two levels. Firstly, the ramifications of allowing banks to provide crypto custody are huge, and hugely beneficial to the growth of crypto markets. Secondly, the bi-partisan nature is most welcome.

And the results are in – the bill has been passed which is great news.

The disappointing news is that the bi-partisan approach was not reflected at all in the party-political affiliations of the voting members:

                                                      “yea”          “nay”

Republican                                    207               0

Democrat                                     21             182

Chairman of The House Financial Services Committee, Patrick McHenry, said:

“This resolution will allow consumers to hold their digital assets in one of the safest ways possible — through highly regulated banks and other financial institutions.”

…

In an almost immediate response, Joe Biden declared he would veto the bill.

Why is the desire for financial freedom and privacy versus financial coercion and control so politically split in the US? More interestingly, given that the current situation is unsustainable, which party blinks first?

https://www.youtube.com/watch?v=E4ovvsUG-KY

Curious Cryptos’ Commentary – HFSC vs the SEC

The House Financial Services Committee, chaired by Patrick McHenry, has frequent run-ins with Gary Gensler, chair of the SEC.

Patrick has threatened Gensler with a Congressional subpoena for failing to provide requested documents, the very first time in history this would have happened if he does do so.

The exchange between them is mightily entertaining:

https://twitter.com/FinancialCmte

Go Patrick!