The U.S. Securities and Exchange Commission (SEC) has overturned a controversial Biden-era rule, paving the way for Wall Street banks to expand their cryptocurrency offerings. The Financial Times reported on Friday that the decision signals a significant shift in regulatory attitudes towards digital assets under President Donald Trump’s second term.
Late Thursday, the SEC reversed its prior guidance, known as SAB 121, which had required banks to treat digital tokens held for clients as liabilities on their balance sheets. Critics argued the rule imposed excessive costs on banks and effectively blocked them from offering custody services for cryptocurrencies like Bitcoin.
Mark Palmer, an equity research analyst at The Benchmark Company, described the move as a “removal of a punitive framework,” enabling traditional banks to enter the crypto custody space without facing financial penalties.
Trump Administration’s Pro-Crypto Agenda
This decision reflects broader expectations that Trump’s presidency will adopt a more welcoming approach toward the digital asset sector. Trump’s acting SEC chair, Mark Uyeda, alongside Republican commissioner Hester Peirce, has already signaled a shift by forming a crypto-focused task force and dismantling SAB 121.
On the same day as the SEC’s reversal, Trump issued an executive order laying out his administration’s priorities for cryptocurrency regulation. The order calls for recommendations from cabinet-level officials on legislative and regulatory proposals for the sector.
Brian Daly, a lawyer at Akin Gump, highlighted the significance of this change, stating that custody services are “a predicate to everything” in allowing financial institutions to offer broader crypto services. The previous guidance “made it impossible for responsible banks, broker-dealers, and intermediaries to act as crypto custodians,” Daly noted.
Wall Street’s Renewed Interest
The reversal comes as major financial institutions increasingly warm to digital assets. BlackRock CEO Larry Fink recently urged the SEC to “rapidly approve” the issuance of tokenised stocks and bonds, underscoring the growing interest in integrating traditional finance with blockchain technology.
Rick Wurster, CEO of Charles Schwab, expressed optimism about the regulatory shift. “We do want to have the ability to offer spot crypto, and our expectation is that at some point, the regulations around crypto are going to allow us to do that,” Wurster said during an analyst call earlier this week.
The American Bankers Association and other industry groups have long criticised SAB 121. Last year, they lobbied the Biden administration to formally disapprove of the guidance, following bipartisan Congressional measures to overturn it in 2024. Kevin Fromer, president of the Financial Services Forum, called the SEC’s recent decision “a step in the right direction.”
Crypto Market Response
The price of Bitcoin rose over 1.5% on Friday to $105,800 following the announcement, inching closer to its all-time high of approximately $109,000. Analysts see this as a sign of investor confidence in the growing institutional acceptance of digital assets.
