TradFi giant BNY Mellon secures regulatory exemption for crypto ETF custody services

BNY Mellon is taking main steps towards getting into the crypto custody market, notably for Bitcoin and Ethereum exchange-traded funds (ETFs), after receiving an exemption from the SEC, Bloomberg Information reported on September 24.

In accordance with the report, BNY Mellon acquired a waiver from the SEC’s Workers Accounting Bulletin 121 (SAB 121) throughout a assessment by the Workplace of the Chief Accountant. This exemption permits the financial institution to reclassify buyer crypto holdings, that means they do not should deal with these property as enterprise liabilities.

This operational shift might enable extra conventional banks to supply crypto custody companies, a apply that has up to now remained largely inaccessible to them. The event additionally positions BNY Mellon to problem Coinbase’s present dominance in crypto asset administration and builds on the corporate’s cryptocurrency custody ambitions.

Disruption

The transfer to supply custodial companies for spot Bitcoin and Ether ETFs might considerably disrupt the present market panorama, the place Coinbase oversees most of Wall Road’s crypto ETFs, together with these from main asset managers like BlackRock, which holds about $10 trillion in manages property.

Presently, Coinbase’s position has positioned the corporate as a pacesetter in digital asset custody for these funds, however the entry of BNY Mellon might improve competitors and provides prospects extra choices.

BNY Mellon has proven a powerful curiosity within the crypto custody sector since early 2023. In January of that yr, CEO Robin Vince highlighted digital property as a part of the corporate’s long-term strategic imaginative and prescient throughout an earnings name, noting the rising demand for digital property. companies to institutional purchasers.

Analysts estimate that the crypto custody market is rising at round 30% yearly and is at the moment valued at $300 million. If this progress trajectory continues, the market might surpass the $1 billion mark by 2032, with an annual improve of roughly $90 million.

Regulatory hurdles

Regardless of the promising prospects, regulatory challenges stay a significant concern for BNY Mellon because it appears to determine itself within the crypto custody house.

Lawmakers, together with Congressman Patrick McHenry and Senator Cynthia Lummis, have raised issues concerning the transparency of interactions between SEC employees and personal firms.

In a bicameral letter to the SEC and different regulators, they cited personal conferences by which the SAB 121 exemptions had been reportedly mentioned. It’s unclear whether or not BNY Mellon’s exemption was a part of these discussions, which raises questions concerning the regulatory panorama that may govern the financial institution’s actions within the crypto market.

BNY Mellon’s success will largely rely on its capacity to navigate the complicated regulatory setting whereas capitalizing on the rising demand for digital asset companies amongst institutional buyers.

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