BNY Mellon Prepares to Enter Crypto ETF Custody Market

BNY Mellon Prepares to Enter Crypto ETF Custody Market

BNY Mellon, one of the largest U.S. banks, is gearing up to provide custody services for Bitcoin and Ether, focusing on its clients involved with exchange-traded products (ETPs). This move follows a review by the Securities and Exchange Commission (SEC), which could reshape how traditional banks handle digital assets.

Earlier this year, the SEC's Office of the Chief Accountant reviewed the bank's crypto custody approach. Notably, the SEC did not raise objections to BNY Mellon’s decision to avoid classifying the crypto assets it holds as liabilities on its balance sheet. This decision stands in contrast to the SEC’s SAB 121 rule, which requires firms managing crypto assets to list them as both liabilities and assets. However, BNY Mellon's specific case, dealing with ETPs, appears to operate under different conditions, at least for now.

The SEC’s SAB 121 rule was introduced to enhance transparency in financial statements of entities handling crypto assets, recognizing the risks tied to managing these assets. However, the SEC's stance on BNY Mellon’s ETP services suggests the rule might not apply universally across all crypto custody scenarios.

BNY Mellon is in talks with the SEC and other regulators to expand its crypto custody services, aiming to offer a broader range of options. The bank’s gradual entry into the digital asset space, starting with its Bitcoin and Ether custody services for ETP clients, signals a shift in the traditional financial sector’s approach to cryptocurrencies. However, further regulatory acceptance is essential before such services become more widespread across the banking industry.

As BNY Mellon navigates the regulatory landscape, the potential for deeper integration of digital assets into traditional finance is becoming clearer. However, the path remains complex, shaped by ongoing discussions with regulators and the evolving rules governing crypto custody.