Yesterday afternoon, I was discussing with three industry leaders about the price trend of BTC, and then talked about the expected benefits in 2024, and the support for cryptocurrencies in the US election. Suddenly, I thought of something very interesting, which is the SAB121 resolution that was cited now. It had been passed by both houses, but was vetoed by Biden. Then no one talked about this topic anymore.
Today I suddenly remembered that after the US election, whether the Democrats or the Republicans are elected, the repeal of SAB 121 will most likely be proposed again, and the probability of its passage this time will be very high. In particular, Biden’s rejection can be seen as a good thing for the Democratic Party’s "successor". After such a long time, I’m sure everyone has forgotten what SAB121 is.
“SAB 121, an accounting announcement issued by the SEC in 2022, requires that when companies (including banks) custody crypto assets, they must record those assets on their balance sheets as assets and liabilities. This rule poses significant difficulties for banks to provide cryptocurrency custody services, as banks need to prepare corresponding capital reserves for every dollar of custody assets, which conflicts with the traditional asset custody method (assets are not included in the bank's balance sheet).
Due to these strict accounting requirements, many banks have chosen to withdraw or suspend providing custody services for crypto assets, resulting in custody services in the market being mainly provided by non-bank institutions (such as Coinbase).”
In May, U.S. congressmen believed that SAB 121 not only increased the operating costs of banks, but also transferred the custody of crypto assets to the non-bank sector that lacks adequate supervision, increasing systemic risks. Of course, from the current point of view, the most likely to promote this field is the cryptocurrency ETF provider led by BlackRock. As for why, we will talk about it later.
So what are the benefits of SAB121 for cryptocurrencies? Is it because banks can custody cryptocurrencies? In fact, it is not just that. If banks can custody cryptocurrencies, then it is very likely that banks can use the custody cryptocurrencies as collateral. You must know that banks cannot use#BTCand#ETHas collateral now, and even BTC and ETH spot ETFs (such as BlackRock's $IBIT) cannot directly become (US) bank collateral.
This is why I believe that the cancellation of SAB121 was driven by cryptocurrency ETF institutions, mainly BlackRock, and the timing was very clever.
Once SAB121 is revoked, it is very likely that banks will gradually open up custody and mortgage activities. Although this situation is not good for #Coinbase, it is very beneficial to the entire cryptocurrency industry. Because when banks act as custodians and lenders, they are regulated by the SEC, so there is no need to worry about losing the#Bitcointhey keep. Once a problem occurs, the bank must pay 100% compensation, and the compensation will be based on BTC.
The lending of BTC and ETH is the heaviest bomb, which can ignite the rising trend of BTC and ETH prices, because banks can avoid a lot of trust work and fund transfer work by lending, and the most important thing is that banks are equivalent to the second-layer network of BTC! Think about it carefully. When banks intervene, we don’t need the bank’s system to roll back to the BTC network, but BTC is BTC, neither Wbtc nor any cross-chain BTC, and it also solves the risks of cross-chain bridges, so banks are the most important link of "BTCfi".
What is BTCfi?
In fact, it is difficult for BTC to have a real second-layer network, because most second-layer networks currently have no way to roll back data to the BTC network. The so-called cross-chain BTC is achieved through mapping, but the bank's BTC is real BTC, and the bank acts as a custodian and financial provider. Although this is a centralized "protocol", it is undoubtedly the best BTC liquidity solution provided when the#BTCsecond-layer network is not yet perfect, and there is almost no other.
The essence of Fi is to put the BTC custody bills provided by the bank directly on the chain, and use the bills to realize re-pledge (ReStaking) or bill (Staking) financing solutions. Moreover, compared with bank custody and mortgage lending that require strong supervision, BTCfi has a lower threshold. It only needs bank bills to form effective assets, and even the bills can be NFTized to make part of the integrated assets (wealth management package), and it can be implemented without even the supervision of the SEC.
In layman's terms, Circle and USDC need to be regulated, but DeFi that stakes USDC on the chain does not need to be regulated! BTC is this USDC.
I blindly guess that in the first quarter of 2025, the SAB121 repeal bill will be passed. If it is passed and bank ETFs or spot mortgage lending are gradually opened up, it will usher in the golden age of BTC and ETH.
