The US Securities and Exchange Commission (SEC) wants banks to underpin the value of the cryptocurrencies they wish to store, or services they offer customers, with fiat money, according to Reuters.
Critics say this could make it too capital-intensive for lenders to hold cryptocurrency tokens on behalf of clients.
According to sources cited by Reuters, SEC did not consult banking regulators when planning the new rules for banking institutions. “This has thrown a huge wrench in the mix”, one source told the publication.
The industry is not happy with the arrangement as the cryptocurrencies are not the banks’ assets and it’s considered unfair for SEC to consider them as having a bearing on the overall capital status a bank has.
Many banks have now confirmed that they will continue to service existing clients but have paused the intake of new clients.
This could impact some of the biggest financial companies, such as BNY Mellon, Wells Fargo & Co, Goldman Sachs Group Inc, JPMorgan Chase & Co, Deutsche Bank, all of which are experimenting with cryptocurrency services, and trying to get in on the $1tr cryptocurrency industry.
However, SEC requires these companies to classify cryptocurrencies as liabilities because of their complicated legal, technological, and regulatory background.
The tight capital rules they face are supposed to ensure that they do not tip into chain-reaction bankruptcy.
The Thai SEC also introduced similarly restrictive rules, banning lending services earlier this week.