Responding to the Treasury Department’s recent request for comment on ensuring the responsible development of digital assets, the American Bankers Association reiterated its position that regulatory clarity and parity for banks and nonbanks is necessary to ensure consumer protections and support responsible innovation in the digital asset market.
Digital assets have the potential to enable “enhanced efficiencies, new products and new ways to deliver traditional products,” ABA wrote in its comment letter, noting that banks are undertaking research and innovation “responsibly and within a regulatory framework that ensures consumer protection and limits systemic risk. The same cannot necessarily be said for nonbanks.” ABA expressed its concern that since Executive Order 14067 “Ensuring Responsible Development of Digital Assets” was issued in March, there has been little activity to rein in nonbank crypto companies.
An important first step is for regulators to develop “clear definitions” of digital products that group assets by risk. “Oversight and supervision should be applied to banks and nonbanks engaged in digital asset activities alike to ensure all customers are protected equally, regardless of where they engage with the financial marketplace,” ABA wrote. ABA also expressed its “serious concerns” with the applicability of the Security and Exchange Commission’s Staff Accounting Bulletin 121 to regulated banking organizations that safeguard crypto assets. SAB 121 puts banks at a “competitive disadvantage in providing cryptocurrency custody services relative to providers that are not prudentially regulated,” ABA wrote, adding that preventing regulated banks from entering the cryptocurrency custody market “pushes digital asset activity outside the regulatory perimeter, making it less safe for consumers.”