Bank of New York Mellon (BNY Mellon) is making significant strides toward launching custody services for Bitcoin (BTC) and Ethereum (ETH), following its recent exemption from the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121.
As previously reported by Bitcoinist on Friday, BNY Mellon is the first bank to receive this exemption, allowing it to avoid treating the custody of cryptocurrencies as a balance-sheet liability.
The announcement came to light during the testimony of Chris Land, general counsel for pro-Bitcoin US Senator Cynthia Lummis, who confirmed that the SEC had granted BNY Mellon this crucial exemption.
According to a Bloomberg report, BNY Mellon is now closer to rolling out custody services for Bitcoin and Ether held by clients of exchange-traded products (ETPs).
The SEC’s Office of the Chief Accountant conducted a review earlier this year and did not object to BNY Mellon’s determination that safeguarding crypto assets for regulated ETP clients should not be recognized as a liability on its balance sheet.
However, BNY Mellon cautioned that this decision does not resolve the broader issues related to SAB 121, which continues to restrict banks’ ability to custody digital assets.
The bank indicated its intention to engage further with the SEC’s Office of the Chief Accountant for additional use cases, leveraging a “facts and circumstances” approach. The bank stated that it is actively engaging with its banking regulators to facilitate custody services for crypto ETP clients at scale.
Per the report, the crypto custody market is rapidly expanding, with estimates suggesting it could be worth approximately $300 million and growing at around 30% annually. Providers can charge significantly higher fees for safeguarding digital assets compared to traditional securities, with costs potentially reaching up to ten times more.
This heightened expense is largely due to the increased security measures needed to protect against cyber threats, which have resulted in substantial financial losses across the digital asset industry.
BNY Mellon, which oversees over $50 trillion in assets, has expressed confidence in the strong demand for bank-qualified custodians for digital assets.
Currently, the bank supports 80% of SEC-approved Bitcoin and Ether ETPs through its fund services business. By offering crypto custody, BNY Mellon aims to provide clients with a comprehensive end-to-end solution.
The recent launch of US spot Bitcoin exchange-traded funds has highlighted the growing opportunities within the crypto custody sector. Major firms like BlackRock and Fidelity Investments have already accumulated significant assets in these products, further underscoring the market’s potential.
At the time of writing, the largest cryptocurrency on the market has risen to $64,380, up nearly 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com
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