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

BNY Mellon, one of the largest custodian banks globally, is taking significant steps to provide custody services for Bitcoin and Ether specifically for exchange-traded product (ETP) clients. The bank is also aiming to expand its footprint in the crypto sector by seeking additional regulatory approvals to capitalize on the lucrative crypto custody market.

On Tuesday, Bank of New York Mellon Corp. (BNY Mellon) announced to Bloomberg its plans to offer custody services for Bitcoin and Ether held by ETP clients. This initiative comes on the heels of a review by the Securities and Exchange Commission’s (SEC) Office of the Chief Accountant, which did not raise any objections to BNY’s determination that these cryptocurrencies should not be classified as balance-sheet liabilities.

BNY clarified that this determination applies only to its ETP custody clients. According to the SEC’s Staff Accounting Bulletin 121 (SAB 121), banks typically must account for custodial crypto on their balance sheets. However, BNY argues that this rule limits their capacity to provide effective services in this area. The bank is focused on expanding its crypto offerings and is actively seeking regulatory approvals to facilitate large-scale custody services. A bank 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 most significant financial institutions, BNY Mellon manages around $50 trillion in assets under custody and administration as of mid-2024, solidifying its status as a key player in the global banking landscape.

In the current market environment, banks can charge considerably higher fees for the custody of digital assets compared to traditional assets, making this venture particularly attractive. BNY is already established in the ETP market, supporting numerous SEC-approved Bitcoin and Ether products. The upcoming launch of additional crypto-related ETPs, including spot Bitcoin ETFs, presents new opportunities for BNY in the digital asset arena, despite facing regulatory hurdles like SAB 121. An SEC spokesperson remarked, “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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