The oldest American bank is preparing to enter the bitcoin and ether custody market, as the SEC admits an exemption from SAB 121 for some institutional players.
According to Bloomberg, BNY Mellon, the oldest bank in the United States, is close to beginning to offer custody services for Bitcoin and Ether held by ETF clients. This move could bring competition to Coinbase in the custody of digital assets for exchange-traded products.
The bank has made progress toward the new service offering ‘after a review that allowed the company to avoid treating the assets as a liability on the balance sheet.’ It appears that the SEC has granted BNY Mellon an exemption from SAB 121, paving the way for the bank to offer custody services to cryptocurrency ETF clients. In particular, SEC Commissioner Hester Peirce revealed that the agency is allowing ‘particular entities’ to custody Bitcoin and other cryptocurrencies, circumventing the SAB 121 rules that normally prohibit this for financial institutions. Before it can start offering custody services, BNY would need the authorization of other regulators, in addition to the SEC.
According to Bloomberg, the digital asset custody market is currently valued at around $300 million and is growing at 30% annually. Companies providing cryptocurrency custody services can charge higher fees than those applied to traditional assets, given the increased complexity and security risks associated with digital assets.
BNY Mellon has publicly expressed its interest in cryptocurrencies since January 2023, when CEO Robin Vince stated that digital assets represent the bank’s ‘long-term strategy.’ Currently, BNY Mellon supports 80% of the Bitcoin and Ether ETFs approved by the SEC.
