Emily Walker
In a significant change of perspective, Wall Street leaders are demonstrating increased positivity towards the cryptocurrency sector shortly after President Donald Trump commenced his second term. This optimism is largely driven by the new administration’s supportive stance on crypto, contrasting sharply with previous skepticism during Trump’s first term.
Morgan Stanley’s CEO Pushes for More Crypto Engagement
During the World Economic Forum in Davos, Switzerland, Morgan Stanley’s CEO, Ted Pick, emphasized the bank’s desire to enhance its involvement in cryptocurrency transactions. He mentioned, “Our focus is really on whether we, as a highly regulated entity, can serve as transactors.”
Traditionally, banks have hesitated to engage with crypto due to regulatory risks. The SEC has made over 200 enforcement actions concerning cryptocurrencies since 2013, instilling caution that has hindered institutional participation.
However, with the new administration signaling a friendlier regulatory environment for digital assets, many leaders are reconsidering their strategies.
Trump’s administration includes several cryptocurrency supporters in influential positions, such as Paul Atkins for SEC chair and Howard Lutnick for Secretary of Commerce, along with hedge fund manager Scott Bessent for Treasury. If Bessent is confirmed, he would oversee essential departments impacting tax and compliance policies for digital assets.
Morgan Stanley has already begun to engage with cryptocurrencies, becoming the first significant US bank to offer its affluent clients access to Bitcoin funds in 2021. They have also permitted their financial advisors to promote newly launched Bitcoin exchange-traded funds (ETFs).
Pick noted that as Bitcoin solidifies its place in mainstream finance, its standing as a legitimate financial asset will increase. He remarked, “As it continues to trade, perception becomes reality.”
SEC’s Reversal of SAB 121 Reduces Regulatory Challenges for Banks
Despite the enthusiasm, notable obstacles remain. A critical accounting regulation imposed by the SEC in 2022 mandates banks to classify cryptocurrencies as liabilities, enforcing stringent capital requirements that discourage banks from providing crypto custody services.
Efforts to repeal this ruling, known as SAB 121, gained bipartisan support in Congress but were ultimately blocked by then-President Joe Biden, keeping a tight regulatory grip on banks.
Goldman Sachs CEO David Solomon acknowledged these challenges, stating, “Currently, we can’t own Bitcoin due to regulatory restrictions.” However, he expressed openness to revisiting the matter as regulations change.
In a positive turn of events, the SEC has recently overturned SAB 121, potentially easing some constraints for banks wanting to explore digital assets.
SEC Commissioner Hester Peirce, designated to lead a new “crypto task force,” welcomed this development, suggesting a shift towards a more favorable regulatory approach to cryptocurrencies.
Image sourced from DALL-E; chart provided by TradingView.com.