Bank of New York Mellon (BNY Mellon), the oldest bank in the United States, announced its plan to implement custody services for bitcoin (BTC) and ether (ETH), specifically for exchange-traded fund (ETF) investors. This development represents a milestone in the adoption of cryptocurrencies by traditional financial institutions.
The BNY Mellon’s decision is based on a recent review by the accounting office of the Securities and Exchange Commission (SEC), which did not object to BNY protecting the underlying assets of ETFs without having to recognize them as liabilities on its balance sheet, Bloomberg reports.
“The SEC is preventing these cryptocurrency ETFs from being treated as liabilities,” BNY Mellon said, stressing that this review is based on SEC Rule SAB 121, designed to provide clarity on the risks associated with cryptocurrencies.
BNY Mellon argues that SAB 121 has been an obstacle for banks to hold digital assets. In fact, 42 Republican congressmen have asked the SEC to repeal the regulation, arguing that it imposes accounting requirements that make it difficult for banks to hold bitcoin and other crypto assets. What they consider harmful to innovation and competitiveness of the United States in the global financial market, as CriptoNoticias reported earlier.
In that regard, the oldest bank in the United States assured that it is “committed, and will continue to engage, its banking regulators to offer custody services to cryptocurrency ETF clients at scale.”
The SEC’s review is part of a broader trend. In early September, the Office of the Chief Accountant issued observations to other financial institutions. An SEC spokesperson commented that “certain broker-dealers and custodian banks have sufficiently demonstrated to the SEC staff that their fact patterns are different from those described in SAB 121.”
In 2022, BNY Mellon had already announced the technical readiness of its digital asset custody infrastructure, as CriptoNoticias reported. However, the implementation of these services has been complicated by the SAB 121 regulation.
BNY Mellon, which oversees more than $50 trillion in assets as of the end of June, identified “strong demand in the market for bank-qualified custodians for digital assets.”
The bank already supports 80% of SEC-approved BTC and ETH exchange-traded products through its fund services business. With the cryptocurrency custody offering, BNY Mellon seeks to provide a comprehensive solution to its clients.
BNY Mellon’s move into cryptocurrency ETF custody not only expands its services, but also increases competition for current major ETF custodians in the U.S., like Coinbase Global Inc., the leader in this sector.
This announcement by BNY Mellon can be seen as a potential catalyst for further integration of cryptocurrencies into traditional financial markets, thus facilitating investment in cryptoassets for institutions and large investors through regulated vehicles.
This article was created using artificial intelligence and edited by a human on the editorial staff.
