The Securities and Exchange Commission (SEC) has granted approval to the Bank of New York Mellon Corp (BNY) to expand its custody of cryptocurrency assets, marking a significant development in traditional banking’s involvement with digital assets. SEC Chair Gary Gensler announced this approval on Thursday following a speech at the Federal Reserve Bank of New York. With this new approval, BNY Mellon, which manages over $2 trillion in crypto assets, can now offer broader custody services beyond its current offerings tied to crypto exchange-traded funds (ETFs).
Expanding Crypto Custody Services
BNY Mellon already provides custody services for Bitcoin and Ethereum ETFs. However, the bank recently submitted a plan to the SEC’s Office of Chief Accountant to offer more comprehensive custody services for these two major cryptocurrencies. This structure is designed to protect customer funds in the event of bank insolvency, a critical step in ensuring asset security. The SEC responded with a “non-objection” to the plan, essentially greenlighting BNY’s proposal.
SEC Chair Gary Gensler emphasized that the approval isn’t limited to just Bitcoin or Ethereum. “Though the actual consultation related to two crypto assets, the structure itself was not dependent on what the crypto was,” Gensler told Bloomberg News. “It didn’t matter what the crypto was,” he added, highlighting the flexibility of the approved framework.
Key Features of BNY’s Custody Structure
The approved structure includes several key safeguards, such as the use of individual crypto wallets. Each wallet would have its own separate bank account, preventing the commingling of customer assets with the bank’s assets. This move is intended to provide an added layer of protection for customers, ensuring that their funds remain secure even if the bank faces financial difficulties. Gensler noted that this approach is not exclusive to BNY Mellon, saying, “This bank, or any other bank if they came in with the same structure would get the same non-object.”
Implications for Other Banks and Crypto Custody
According to Gensler, other banks and financial institutions have also approached the SEC with potential models for digital asset custody. He credited BNY Mellon for laying the groundwork, stating that the bank had done the “legwork” to ensure customer assets would remain protected in various scenarios.
As the world’s largest custodian bank, BNY Mellon’s foray into crypto custody could influence other financial institutions to follow suit. Founded through the merger of the Bank of New York and Mellon Financial Corporation in 2007, BNY Mellon holds over $49 trillion in assets and has taken a leading role in integrating digital assets into the traditional banking system.
