Banks’ cryptocurrency projects are being disrupted by guidance issued by the U.S. Securities and Exchange Commission (SEC) on how lenders should treat clients’ digital assets.

According to a Reuters report, the guidance would make it too “capital-intensive” for lenders to hold cryptocurrencies for clients. 

Back in March, the SEC said all U.S.-listed public companies functioning as crypto custodians must account for crypto assets as liabilities rather than assets on their balance sheets due to their unique technological, legal and regulatory risks, according to the SEC, CoinDesk reports. 

However, holding clients’ crypto assets as liabilities is especially tough for banks as they are required to hold cash to match liabilities in their balance sheets, the report published on Friday states. 

One source with knowledge of the matter told Reuters news agency: "This has thrown a huge wrench in the mix.” Those lenders wishing to increase crypto offerings have had "to cease moving forward with those plans pending any kind of further action from the SEC and the banking regulatory agencies," they added. 

Custody banks State Street and BNY Mellon, which have been increasing their digital asset offerings, have had their projects disrupted as a result of the guidance, the report adds. 

Head of State Street Digital, Nadine Chakar said the move would make offering crypto custody services uneconomical: "We do have an issue with the premise of doing that, because these are not our assets. This should not be on our balance sheet.” 

Whilst a BNY Mellon spokesperson stated: “BNY Mellon believes digital assets are here to stay, and increasingly becoming part of the mainstream of finance.”

In addition, a U.S. Bancorp spokesperson said of the SEC guidance that although it is still offering Bitcoin custody services to current clients, “we are pausing intake of additional clients in this service as we evaluate the evolving regulatory environment.”