BNY Mellon, one of the largest banks in the United States and the world, has received the green light from the SEC to expand its services and offer cryptocurrency custody to its clients and investors.
In a recent speech, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said that Bank of New York Mellon Corp., better known as BNY Mellon, is authorized to offer cryptocurrency custody services to its clients, marking an important milestone in the integration of digital assets into the traditional financial system.
This authorization, long awaited by the American bank, not only expands the opportunities for BNY Mellon in the cryptocurrency and digital asset market, but also sets a precedent for other financial institutions also seeking to participate in this growing market.
BNY Mellon introduces new structure for cryptocurrency custody
The SEC chairman has acknowledged that BNY Mellon’s proposed structure for offering digital asset custody services is innovative and could be applied to a variety of cryptocurrencies beyond Bitcoin and Ethereum.
According to Bloomberg, the structure presented by the bank includes the use of individual wallets for each of its clients, which will ensure that assets are not mixed with those of the banking institution. In this regard, Gensler stressed that this approach ensures the safety and protection of clients’ funds in the event of bank insolvency, which is considered a crucial aspect in the crypto market, considering unfortunate events such as the bankruptcy of Celsius Network and FTX.
Exception to SEC Rule SAB 121
Bloomberg also reported that the SEC has granted BNY Mellon a “no objection” to its crypto custody structure, meaning the bank can proceed without having to comply with the rule. SAT 121, which requires institutions to reflect the value of digital assets they hold on behalf of their clients on their balance sheets. This decision represents a significant relief for BNY Mellon, which had been looking for a way to offer custody services without the restrictions imposed by this regulation.
SAB Rule 121 has come under fire from the cryptocurrency industry, which argues that its requirements are overly restrictive and limit the ability of banks and regulated financial institutions to offer digital asset custody services.
Gensler has acknowledged that while the SEC’s non-objection specifically pertains to Bitcoin and Ethereum exchange-traded funds (ETFs), BNY Mellon’s custody structure could be applied to other digital assets in the future. With this development, the U.S. securities regulator could open the door for other financial institutions to follow BNY Mellon’s lead. According to Bloomberg, Gensler mentioned that several banks and brokers are in talks about potential custody structures that could avoid SAB 121 requirements, suggesting that the federal regulator is willing to consider innovative approaches that ensure the protection of clients’ assets.
“This bank, or any other bank if it came with the same structure, would get the same non-objective”, Gensler said during his speech.
Interest in spot ETFs resurfaces
The SEC’s decision has been greeted with enthusiasm by the cryptocurrency industry, which sees it as validation of the potential of digital assets in the mainstream financial system. BNY Mellon’s ability to offer cryptocurrency custody services could facilitate the adoption of these assets by institutional investors, who have shown increasing interest in the cryptocurrency space to date.
Moreover, the SEC approval comes at a time when the cryptocurrency market is experiencing a resurgence, with a surge in demand for investment products related to digital assets. At the time of writing, Bitcoin-based spot ETFs have accumulated over $18.800 billion in net inflows, since their launch in early January.
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