TL;DR
- The SEC approves BNY to offer digital asset custody.
- The structure of the Bank of New York could be applied beyond Bitcoin and Ethereum ETFs.
- Customer assets will be protected against bank insolvencies.
The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, confirmed that the Bank of New York Mellon (BNY) has received approval to offer digital asset custody services. It will have the ability to expand beyond Bitcoin and Ethereum ETFs. Although the approved structure initially focused on these two assets, Gensler highlighted that it could be applied to other types of cryptocurrencies in the future.
Earlier this week, BNY presented a plan to the SEC outlining how it would custody BTC and ETH assets through an individual wallet structure, ensuring that customer funds are not mixed with the bank’s assets. This measure would protect client funds in the event of bank insolvency. The SEC responded with a “no objection,” indicating that the proposal did not violate regulatory requirements.
BNY Will Protect Assets Agains Hacks and Insolvencies
Gensler praised BNY’s approach, stating that the bank has done the necessary work to ensure that customer assets will not be compromised in the event of bankruptcy. This is especially relevant after the collapse of several digital asset platforms like FTX, Celsius Network, and Voyager Digital, where customers lost access to their funds. Additionally, other banks that present a similar structure would receive the same regulatory treatment from the SEC.
The industry has expressed concerns about certain regulatory requirements, such as the Staff Accounting Bulletin 121 (SAB 121), which outlines how digital assets should be reflected on the balance sheets of financial institutions. However, BNY’s decision offers an alternative path that could help mitigate these restrictions.
The Bank of New York is entering the cryptocurrency custody market, a highly lucrative sector, with an estimated value of $300 million and annual growth of approximately 30%.
