BNY Mellon Advances in Bitcoin and Ethereum Custody Following SEC Exemption

BNY Mellon, the oldest banking institution in the United States, is set to provide custodial services for Bitcoin and Ethereum exchange-traded funds (ETFs). This development follows an exemption from the SEC’s Staff Accounting Bulletin 121 (SAB 121), according to a recent report. This exemption allows the bank to manage customer crypto assets without considering them as corporate liabilities, a significant operational shift that could pave the way for more traditional banks to enter the cryptocurrency custody market.

BNY Mellon’s Strategic Move into Crypto ETFs

BNY Mellon’s closer alignment with crypto ETFs, specifically for spot Bitcoin and Ether, positions it as a potential challenger to Coinbase, which currently dominates the market. Coinbase holds the digital assets backing most of Wall Street’s spot crypto ETFs, including those managed by major firms like BlackRock.

BNY Mellon’s interest in the crypto custody market has been evident since 2023. In January of that year, CEO Robin Vince highlighted digital assets as part of the company’s long-term strategies during an earnings call.

Growth of the Crypto Custody Market

Analysts predict that the crypto custody market is expanding at an annual rate of 30%, currently valued at $300 million. If this trend continues, the market could exceed $1 billion by 2032, with an annual growth of approximately $90 million. This rapid growth underscores the increasing demand for secure and reliable crypto custodial services.

Regulatory Challenges and Future Prospects

Despite the promising outlook, regulatory scrutiny remains a significant hurdle for BNY Mellon’s entry into the crypto custodial ecosystem. Lawmakers, including U.S. Representative Patrick McHenry and Senator Cynthia Lummis, have raised concerns about private meetings between SEC staff and companies, suggesting that SAB 121 exemptions were a topic of discussion in these meetings. The specifics of BNY Mellon’s review process remain unclear, but regulatory challenges could impact the bank’s progress in this new venture.

“BNY Mellon’s entry into crypto custody could reshape the landscape, offering a secure and traditional banking alternative for digital asset management.”

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