Citigroup has apparently received a warning from the SEC that if it builds a crypto platform and begins to act as a custodian for cryptocurrencies, it’s going to impact its balance sheet – which means that the Fed will also have to require it to hold more capital against risky assets. Citigroup reported the following on its quarterly filing (10-Q) with the SEC for the quarter ending March 31, 2022:
“In March 2022, the SEC issued Staff Accounting Bulletin (SAB) No. 121, which expresses the views of the SEC staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users. Specifically, the guidance requires issuers that hold digital assets for their platform users to recognize a liability for their obligation to safeguard the digital assets held and a corresponding asset, measured initially and subsequently at fair value. The guidance is effective for interim and annual periods ending after June 15, 2022, with retrospective application to the beginning of the fiscal year, with early adoption permitted. Citi is currently assessing the application of SAB 121, but based on its current activity does not expect any impact to its results of operations as a result of adopting SAB 121.”
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