US Government Considers Restricting Banks from Holding Cryptocurrency-based ETFs

The US government is mulling over imposing regulations that could limit banks' involvement with cryptocurrency-based Exchange-Traded Funds (ETFs). Christopher Waller, a member of the Federal Reserve Board of Governors, expressed his concerns, stating his reluctance for banks to possess significant shares of digital asset-backed ETFs. Waller's influential stance suggests potential regulatory actions looming over the horizon.

Simultaneously, on February 14th, a coalition of banking and financial organizations penned a letter to Gary Gensler, the Chair of the US Securities and Exchange Commission (SEC), urging the reversal of a requirement mandating banks to hold cryptocurrencies on their balance sheets. This requirement escalates the costs associated with providing custodial services to ETF issuers, rendering collaboration with fund creators financially unviable.

The deliberations within the US government coupled with the financial sector's lobbying efforts signal a pivotal moment in the regulation of cryptocurrency investments, with potential ramifications for banks and digital asset investors alike.