Proceeding toward offering custody services for Bitcoin and Ether on behalf of its exchange-traded fund (ETF) customers is the Bank of New York Mellon (BNY). This action is in line with a recent ruling by the U.S. Securities and Exchange Commission (SEC), which lets BNY avoid particular contentious accounting rules pertaining to cryptocurrencies.
After looking into BNY’s activities earlier this year, the SEC’s Office of the Chief Accountant decided the bank would not have to abide by the rules described in Staff Accounting Bulletin (SAB) 121. Since its introduction in April 2022, this bulletin—which demands that businesses with client crypto assets categorize them as liabilities in their financial accounts—has generated significant debate.
The ruling of the SEC may let other financial firms pursue such exemption. A spokesman claims that several banks and brokers have proved that their circumstances differ enough from those described in SAB 121 to let them circumvent these accounting restrictions as long as they provide sufficient protections for crypto assets.
Apart from the SEC, other authorities must approve before BNY can formally start its custody services. To guarantee compliance and enable its access into the crypto custody market, the bank has said it is closely interacting with its financial regulators.
From its first presentation, SAB 121 has been a divisive topic. It faced criticism from many other fields, especially after it helped to create false impressions of Coinbase’s financial situation after their Q1 2022 report. Concerned about the direction, legislators have labeled it as “regulation disguised as staff guidance.” Investigating the situation as well, the Government Accountability Office found that SAB 121 need to be under Congressional supervision.
The SEC maintained its position in face of industry group demand to exclude classic assets recorded on blockchains from SAB 121’s criteria. President Joe Biden blocked attempts at legislative reversal of this direction.
With the crypto custody industry valued at about $300 million and showing an annual growth rate of almost 30%, BNY Mellon’s arrival might provide a threat to current participants like Coinbase, who presently rules the market for U.S. spot Bitcoin ETFs.
Since at least January 2023, BNY Mellon has shown interest in digital assets; CEO Robin Vince sees them as a vital long-term plan. Already supporting a good number of SEC-approved Bitcoin and Ether ETFs, the bank positions itself to profit from the growing crypto custody market.
