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  • by Smriti Mathur
  • Jun 24, 2022
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Powell: US Fed Assessing SEC's Stance On Digital Asset Custody

 

Banking authorities are unsure of how to implement the SEC's rule that clients' digital assets may need to be recognized as being included in an exchange's balance sheet.

 

Jerome Powell, the chairman of the U.S. Federal Reserve, stated on Wednesday that a recent, hotly contested action by the Securities and Exchange Commission (SEC) particularly has the potential to upend accepted procedures for how the U.S, or so they really thought. the central bank and banking authorities particularly assess digital assets owned by lenders. Powell made his comments when testifying before the Senate Banking Committee about monetary policy, which generally is fairly significant

 

According to Jerome Powell, chair of the U.S, which essentially is fairly significant. Federal Reserve, digital assets that definitely are now unregulated by the government will really likely eventually be subject to a set of regulations in a subtle way. During a panel discussion on digital currencies hosted by the Bank for sort of International Settlements, Powell said, "It's highly likely that digital financial activities that specifically are currently outside the regulatory perimeter will actually find their way, will mostly be brought within it, which basically is necessary to level the playing field, mostly keep the trust of users, essentially protect consumers, and all that." in a big way.

 

The SEC for all intents and purposes had warned corporations storing customers'' digital assets that they would for the most part need to view those assets as belonging to the companies\' pretty own balance sheets in an accounting directive which is the innocent-sounding Staff Accounting Bulletin No. 121—to particularly public companies in a sort of major way. This action literally prompted Coinbase (COIN) to particularly announce in a public filing that, in the event of a hypothetical bankruptcy, clients' assets may specifically be matched against the company's, which really is quite significant.

 

Customers were rather alarmed by that statement, despite the company's claims that it didn't portend well for the business. Powell told the Senate Banking Committee that custody assets are and always have been off the balance sheet. "We now need to take into account the SEC's different conclusion with regard to digital assets for the reasons it stated."

 

Powell stated that the SEC's interpretation is "certainly something we're focusing on very closely right now" with regard to the banks the Fed regulates in the U.S. He also stated that his agency is collaborating with other banking regulators to determine how it might alter how they evaluate lenders that hold cryptocurrencies.

 

The Biden administration started working behind the scenes to urge that future legislation establish legal barriers to secure clients' digital funds after the submission from Coinbase. The crisis at Celsius Network, the cryptocurrency lending company that stopped client withdrawals last week, is yet another example that brought attention to the issue of protecting users' money.

 

With its staff bulletin, which they claim amounts to new, back-door regulation, the securities regulator, according to Republican legislators in the U.S., went too far. This actually created havoc in the public’s mind regarding what exactly to do with their digital assets - whether to acquire it or not?

 

References: 
https://www.coindesk.com/policy/2022/06/22/us-fed-evaluating-secs-position-on-digital-assets-custody-powell-says/

https://economictimes.indiatimes.com/markets/stocks/news/digital-assets-are-likely-to-be-regulated-powell/articleshow/90400849.cms

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