TLDR
- SEC approves BNY Mellon’s crypto custody plan
- Plan allows for services beyond Bitcoin and Ether ETFs
- Separate crypto wallets linked to bank accounts for client safety
- Approval raises questions about regulatory consistency
- BNY Mellon’s approach may set precedent for other banks
This approval allows the bank to offer digital asset services that may go beyond Bitcoin and Ether ETFs.
SEC Chair Gary Gensler stated that BNY Mellon’s approach is not limited to specific cryptocurrencies, opening the door for custody of other digital assets.
The bank’s plan involves providing each client with a separate crypto wallet linked to a bank account. This setup aims to protect customer assets from the risks of bank bankruptcy.
BNY Mellon’s custody model received a ‘non-objection’ from the SEC, allowing the bank to hold digital assets without violating regulatory rules.
The approved structure emphasizes asset protection, a key concern in digital asset custody. Gensler praised BNY Mellon for its thorough approach to safeguarding customer assets, even in a bankruptcy scenario.
This approval comes at a crucial time for the crypto industry. Many traders have faced issues with insolvent platforms like Celsius Network, FTX, and Voyager Digital.
BNY Mellon’s approach could serve as a model for other financial institutions looking to offer digital asset custody services.
Gensler mentioned that while initial discussions focused on Bitcoin and Ether, the approved structure is flexible. This flexibility allows BNY Mellon to potentially expand its custody services to other types of digital assets, within regulatory boundaries.
The SEC Chair also stated that any other bank wanting to implement a similar structure would receive the same regulatory consideration. However, banks would still need approval from their prudential supervisors before offering digital asset custody services.
The approval has not been without controversy. Some crypto industry stakeholders claim BNY Mellon received special treatment.
Under SAB 121 accounting rules, institutions must include the value of custodial crypto assets on their balance sheets along with an equivalent liability. This practice is unpopular in the industry.
Critics, including SEC Commissioner Hester Peirce and Custodian Bank CEO Caitlin Long, argue that the SAB 121 no-action relief granted to BNY Mellon isn’t being applied consistently to other institutions. They claim regulators are assisting large banks while complicating the process for others.
The approval raises questions about regulatory consistency in the crypto space. Some industry participants feel the rules are not being applied evenly, with larger institutions potentially receiving more favorable treatment.
Despite these concerns, BNY Mellon’s approved plan represents a significant step in the integration of traditional banking with digital asset services.
The bank’s approach to separating client assets and linking crypto wallets to bank accounts could set a new standard for safety in crypto custody.
