FameEX Hot Topics | BNY Mellon Collaborates with Banking Regulators to Provide Scalable Crypto Custody Services

BNY Mellon, one of the world’s largest custodian banks, is making strides to offer custody services for Bitcoin and Ether aimed at exchange-traded product (ETP) clients. The bank is also focused on expanding its presence in the crypto space, planning to seek additional regulatory approvals to tap into the lucrative crypto custody market.

On Tuesday, Bank of New York Mellon Corp. (BNY Mellon) informed Bloomberg about its preparations to provide custody services for Bitcoin and Ether held by ETP clients. This development follows a review by the Securities and Exchange Commission’s (SEC) Office of the Chief Accountant, which did not object to BNY’s assessment that these crypto assets should not be recognized as balance-sheet liabilities.

BNY emphasized that this conclusion specifically pertains to its ETP custody clients. Under the SEC’s Staff Accounting Bulletin 121 (SAB 121), banks are generally required to account for custodial crypto on their balance sheets. However, BNY contends that this rule significantly hampers their ability to offer such services effectively. The bank is committed to enhancing its crypto offerings and is actively pursuing regulatory approvals to enable large-scale custody services. A representative stated, “BNY has engaged, and will continue to engage, its banking regulators to offer custody services to crypto ETP clients at scale.”

As one of the oldest and largest financial institutions, BNY Mellon manages approximately $50 trillion in assets under custody and administration as of mid-2024, reinforcing its position as a major player in the global banking sector.

The current market allows banks to charge significantly higher fees for safeguarding digital assets compared to traditional assets, making this business particularly attractive. BNY is already well-established in the ETP market, supporting a substantial number of SEC-approved Bitcoin and Ether products. The anticipated launch of more crypto-related ETPs, including spot Bitcoin ETFs, presents growing opportunities for BNY in the digital asset space, despite regulatory challenges such as SAB 121. An SEC spokesperson noted, “Certain broker-dealers and custody banks have sufficiently demonstrated to SEC staff that their fact patterns are different from those described in SAB 121.”

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