American Banks Can Finally Get Their Hands On Bitcoin

The decree by Donald Trump and the repeal of the deadly accounting standard SAB 121 are very promising for bitcoin.

Promise Kept

Donald Trump promised that his government would stop putting obstacles in the way of bitcoin. This promise has been fulfilled with the decree “Strengthening American Leadership in Digital Financial Technology”.

This decree marks the end of the infamous operation Chokepoint 2.0, the unofficial name for the covert attempt to debank companies linked to bitcoin. Let’s recall that Silvergate Bank, Signature Bank, and Silicon Valley Bank were among those affected. Not to mention FTX, whose clients are finally expected to be reimbursed in March.

The section of the decree referring to operation Chokepoint states:

“This decree orders the protection and promotion of fair and open access to banking services for all law-abiding citizens and private sector entities.”

The other major news is the withdrawal of the infamous accounting standard “SAB 121” concocted in 2022 by the SEC, whose sole purpose was to deter banks from offering bitcoins to their clients.

To understand this accounting trickery, we must first explain how the accounting system operates in the context of asset custody.

SAB 121

Assets held by banks on behalf of their clients are off-balance sheet. Why off-balance sheet? Because the bank does not own the assets. It merely acts as an intermediary and only accounts for custody fees (revenue).

Example:

Let’s say Bank of America holds $10 billion in stocks for its clients and earns $50 million a year in custody fees.

No modification of its assets or liabilities is required. Only the $50 million is recorded as revenue on its balance sheet.

The problem with the SAB 121 standard is that it forces banks to include it on their balance sheet. Thus, they appear more indebted than they really are. The Debt to Equity ratio is negatively impacted.

Quick example of distortion of the debt/market value ratio:

In the pre-SAB 121 situation, if Bank of America had $100 billion in assets and $60 billion in liabilities, the ratio was 100/60 = 1.66. This means $1.66 of debt for every dollar of market capitalization.

If Bank of America also held $10 billion in bitcoin, SAB 121 would push its liabilities up to $110 billion, making the ratio 110/60 = 1.83.

And of course, a higher ratio makes the bank or platform appear riskier to investors.

Bitcoin Goes to the Bank

In summary, SAB 121 aimed to harm bitcoin while stocks, bonds, or even gold do not face such unfavorable treatment.

This situation was also not to BlackRock’s advantage, which had no choice but to work with disreputable platforms for its Bitcoin ETF, knowing that the specter of FTX’s collapse still lingers.

SAB 121 began to crack last September when BNY Mellon was able to get a kind of tacit exemption. Things are now clear, as the SEC has just removed this deadly accounting standard.

In other words, the floodgates are wide open. Banks will be able to directly offer bitcoins to those who did not want to go through platforms with questionable reputations. Soon, all banks will offer custody services and loans secured by bitcoins.

They might even integrate it into their own treasuries, as Microstrategy and a small hundred other listed companies already do.

Tokenization of Markets / Strategic Reserve of Bitcoins

BlackRock intends to take advantage of this upheaval to tokenize financial markets. Its CEO Larry Fink did not say otherwise at Davos:

JUST IN: @BlackRock CEO Larry Fink says "I want the SEC to rapidly approve the tokenisation of bonds and stocks."🚀

Give a ❤️ if you're bullish right now! pic.twitter.com/S54xHYJTE4

— CoinCodex (@CoinCodex) January 23, 2025

Here are the expected developments:

• Markets open seven days a week.
• Instant and transparent transactions.
• Self-custody of one’s stocks and debt securities. This will result in a massive reduction in management costs for clients and asset managers.

Finally, let’s conclude by noting that the decree establishes a “working group on digital asset markets” led by David Sacks.

Given his interactions with Senator Cynthia Lummis on X, there is little doubt that he will facilitate the passage of the Bitcoin Act and the creation of a national reserve of bitcoins, knowing that the Senator has taken the lead of the Senate Banking Subcommittee dedicated to digital assets.

Trump's Crypto Czar: "We are going to need to evaluate a National Stockpile of Digital Assets, we haven't decided to do it yet." pic.twitter.com/7Zds2TAOZg

— Bitcoin News (@BitcoinNewsCom) January 24, 2025

All these anticipated good news allow bitcoin to remain at its all-time high. We should expect to go even higher when the national reserve of bitcoins becomes official.

Larry Fink anticipates $700,000 for one bitcoin…