TL;DR
- Bank of New York Mellon (BNY) plans to offer custody services for cryptocurrencies, such as Bitcoin and Ethereum.
- Despite this opportunity, BNY notes that the SEC’s SAB 121 rule limits banks’ ability to provide these services, which poses an obstacle to their expansion.
- The crypto custody market is valued at approximately $300 million and grows at an annual rate of 30%.
Bank of New York Mellon (BNY) is preparing to offer custody services for cryptocurrencies, specifically Bitcoin and Ethereum, to clients of exchange-traded products (ETP).
The decision follows a review that allowed the institution to avoid recognizing these assets as liabilities on its balance sheet, a fundamental change that could facilitate its entry into the crypto custody market. The review was conducted by the Office of the Chief Accountant at the Securities and Exchange Commission (SEC), which supported BNY’s plans.
However, BNY has highlighted that the SEC’s SAB 121 rule, which establishes accounting requirements for cryptocurrencies, continues to limit banks’ ability to offer these services. This has been an obstacle for many financial institutions seeking to expand their offerings in the digital asset market. The banking institution has expressed its intention to continue collaborating with regulators to explore more custody applications for crypto assets.
The custody market presents a significant opportunity, as providers can charge significantly higher fees for the security of these assets compared to traditional assets, due to the heightened risk of cyberattacks.
BNY Enters a $300 Million High-Growth Market
Currently, the crypto custody market is estimated to be worth around $300 million, with an annual growth rate of approximately 30%. This increase is driven by the growing need for users to find ways to protect themselves from scams and hacks.
BNY also supports 80% of the SEC-approved Bitcoin and Ethereum ETPs through its fund services division. The introduction of Bitcoin exchange-traded funds in the United States, which have accumulated around $58 billion in assets, highlights the need to improve custody services. Competition to provide such services may intensify in the coming times. BNY seeks to position itself as a leader in the sector, which could also impact the current market leaders, such as Coinbase.
On the other hand, the regulatory context for digital assets has gained special relevance in U.S. electoral politics. Figures like Donald Trump have expressed their support for the crypto industry, while Kamala Harris has pledged to promote investment in cryptocurrencies and emerging technologies under appropriate regulatory frameworks.