- Bank of New York Mellon (BNY) intends to provide custody services for digital currencies, including Bitcoin and Ethereum.
- However, BNY highlights that the SEC’s SAB 121 regulation restricts banks from offering these services, presenting a challenge to their growth.
- The cryptocurrency custody sector is estimated to be worth around $300 million, with an annual growth rate of 30%.
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Bank of New York Mellon (BNY) is set to launch custody services for cryptocurrencies, focusing on Bitcoin and Ethereum, aimed at clients involved with exchange-traded products (ETP). This strategic move comes after a comprehensive review that enabled the bank to avoid classifying these digital assets as liabilities on its balance sheet, marking a significant shift that could pave the way for its participation in the cryptocurrency custody sector. The review was facilitated by the Office of the Chief Accountant at the Securities and Exchange Commission (SEC), which endorsed BNY’s initiatives.
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Despite this progress, BNY has pointed out that the SEC’s SAB 121 regulation, which outlines the accounting standards for cryptocurrencies, still imposes restrictions on banks wishing to provide these services. This regulatory framework has presented challenges for numerous financial institutions aiming to broaden their services within the digital asset landscape. BNY has indicated its commitment to ongoing collaboration with regulatory bodies to investigate further custody solutions for crypto assets.
The bank’s proactive approach reflects a growing recognition of the importance of digital assets in the financial ecosystem. By navigating the complexities of regulatory compliance and seeking to innovate within the constraints of existing rules, BNY is positioning itself to be a key player in the evolving market for cryptocurrency custody services. This initiative not only underscores the bank’s adaptability but also highlights the increasing demand for secure and regulated solutions in the realm of digital currencies.
Because of the increased danger of cyberattacks, custody providers may charge far greater costs for the security of these assets than they can for traditional assets, which makes the market for custody very attractive.
BNY Enters a High-Growth $300 Million Market.
The current valuation of the crypto custody market is approximately $300 million, with an annual growth rate nearing 30%. This expansion is largely attributed to the increasing demand among users for effective measures to safeguard against scams and cyberattacks.
BNY Mellon plays a significant role in this landscape, as it facilitates 80% of the SEC-approved Bitcoin and Ethereum exchange-traded products (ETPs) through its fund services division. The emergence of Bitcoin ETPs in the United States, which have amassed around $58 billion in assets, underscores the necessity for enhanced custody solutions. As competition in this sector is expected to escalate, BNY Mellon aims to establish itself as a frontrunner, potentially influencing the dynamics of existing market leaders like Coinbase.
Moreover, the regulatory environment surrounding digital assets has become increasingly pertinent in U.S. electoral discussions. Prominent political figures, including Donald Trump, have voiced their support for the cryptocurrency sector, while Kamala Harris has committed to fostering investment in cryptocurrencies and innovative technologies within suitable regulatory frameworks.
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