New SEC "First Fire": Opening the Door for U.S. Financial Institutions to Hold Cryptocurrency

The new U.S. Securities and Exchange Commission (SEC) has made a significant move.

On January 25, according to media reports, the SEC withdrew a guideline known as SAB 121 on Thursday evening. This guideline previously called for financial institutions to treat the cryptocurrency assets held for clients as liabilities on their balance sheets, significantly increasing the cost of holding digital assets.

As one of the first measures supporting cryptocurrency during Trump's second term, analysts believe that the SEC's action effectively opens the door for U.S. financial institutions to hold cryptocurrencies, and supports the market's general expectation that the Trump administration will take a more welcoming stance towards digital assets.

Additionally, according to Global Times, Trump also signed an executive order on the same day regarding cryptocurrencies, aimed at protecting the rights of individuals and businesses to legally use open blockchain networks, including developing software, trading, and self-custody of digital assets. Furthermore, he requested cabinet-level officials to submit a proposal report on regulatory and legislative proposals in a few months.

Although Trump-nominated SEC Chairman Paul Atkins is still awaiting Senate confirmation, acting Chairman Mark Uyeda and another Republican commissioner Hester Peirce have extended a "friendly hand" to cryptocurrencies. They established a working group and abolished this guideline.

Mark Palmer, a stock research analyst at Benchmark, stated:

“SAB 121 created a punitive framework that effectively prevented U.S. banks from offering custody services for Bitcoin and other cryptocurrencies. Now traditional banks will be able to provide crypto custody services without facing de facto penalties.”

Even before the SEC took action, major U.S. banks were eagerly anticipating the ability to attract cryptocurrency clients, as Trump and his allies in the executive and legislative branches were paving the way for digital assets. Charles Schwab CEO Rick Wurster stated during an analyst conference call this week, “We do hope to offer spot cryptocurrency services, and we expect that at some point, cryptocurrency regulation will allow us to do so.”

Brian Daly of Akin Gump law firm pointed out that custody services are a "prerequisite" for financial institutions to offer crypto services to clients. He said the old rules essentially made it impossible for all responsible banks, brokers, and financial intermediaries we rely on to become cryptocurrency custodians.

Today, the price of Bitcoin fell by 0.11% to around $104,769.8, below its historical high of around $109,000.