TLDR
SEC approves BNY Mellon’s crypto custody plan, not limited to BTC and ETH
Plan uses separate crypto wallets linked to bank accounts for client protection
Approval allows BNY Mellon to potentially offer custody for various digital assets
Move aims to protect customer assets, even in bankruptcy scenarios
Critics claim BNY Mellon received preferential treatment regarding SAB 121 rules
The U.S. Securities and Exchange Commission (SEC) has given approval to Bank of New York Mellon Corp (BNY Mellon) for a new cryptocurrency custody plan.
This move allows the bank to offer services related to digital assets, potentially expanding beyond just Bitcoin and Ethereum ETFs.
SEC Chair Gary Gensler stated that BNY Mellon’s approach is not restricted to specific cryptocurrencies, opening the door for the bank to potentially custody a wider range of digital assets.
The plan involves providing each client with a separate crypto wallet linked to a bank account. This structure aims to protect customer assets by keeping them separate from the bank’s own funds, even in the event of a bankruptcy.
The SEC’s approval comes as a ‘non-objection’ to BNY Mellon’s proposed custody model. This allows the bank to hold digital assets without breaking regulatory rules.
Gensler praised BNY Mellon for its thorough approach to ensuring customer asset protection.
This development is significant in the context of recent insolvencies in the crypto industry, such as those involving Celsius Network, FTX, and Voyager Digital.
BNY Mellon’s approach could serve as a model for other financial institutions looking to enter the digital asset custody space.
Gensler mentioned that while initial discussions with BNY Mellon focused on Bitcoin and Ethereum, the approved structure is flexible.
This flexibility allows BNY Mellon to potentially expand its custody services to other types of digital assets, as long as it stays 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 criticism. Some in the crypto industry claim that BNY Mellon received special treatment, particularly regarding the SAB 121 accounting rules.
These rules typically require institutions to include the value of custodial crypto assets on their balance sheets along with an equivalent liability. Critics argue that BNY Mellon was given more flexibility with these rules than other institutions.
U.S. SEC Commissioner Hester Peirce and other market participants have expressed concern about this perceived bias. They argue that the SAB 121 no-action relief granted to BNY Mellon is not being applied consistently across the industry.
Caitlin Long, CEO of Custodian Bank, suggested that regulators are making the process easier for large banks while complicating it for others.
Despite these criticisms, the approval marks a significant step in the integration of traditional banking with digital asset services. It demonstrates the SEC’s willingness to work with established financial institutions to create secure and regulated crypto custody solutions.
BNY Mellon’s approved plan emphasizes asset protection, a crucial concern in digital asset custody. By using separate wallets linked to bank accounts, the bank aims to ensure that customer assets remain protected and segregated from the bank’s own funds.
The post BNY Mellon Gains SEC Approval for Digital Asset Custody Services appeared first on Blockonomi.
