US Securities and Exchange Commission boss Gary Gensler says BNY Mellon could hold digital assets beyond exchange-traded funds.
America’s largest custodian, BNY Mellon, has received regulatory approval to offer crypto custody to its clients. The consent was an upgrade of an earlier permission to provide custody for Bitcoin and Ethereum spot ETFs.
Per a Bloomberg report, Gensler has green-lighted BNY Mellon’s expansion beyond the ETFs as far as it imbibes with its approved system of custody. The SEC chair asserted that although the initial proposal was for the two largest cryptocurrencies by market cap, the structure allows for any digital asset custody.
It bears mentioning that America’s oldest bank received a non-objection injunction after a reformed proposal to hold Bitcoin and Ethereum spot ETFs without public disclosure as a liability. The Office of the Chief Accountant exempted BNY Mellon amidst the Staff Accounting Bulletin (SAB) 121 impediment.
BNY Mellon Improvises Amid Regulatory Impediments
The banking giant introduced a new retrofit to siphon financial institutions’ legal constraints in digital asset custody. BNY Mellon’s proposed structure involved creating distinct bank accounts for individual crypto wallets to separate the bank’s funds from custodial assets.
With this structure, the assets of investors custodied by BNY Mellon will be protected in the case of bankruptcy. This was the case when firms like Voyager, Celsius, and FTX filed for bankruptcy.
Gensler lauded BNY Mellon’s efforts to protect user assets, stating it was a well-thought-out structure. He further noted that other banks looking to custody cryptocurrencies could emulate the approach and receive the same exemption given to BNY Mellon.
The Lucrative Crypto Custody Sector
Notably, one of the major reasons banks are angling to custody of crypto assets is their lucrative nature. According to reports, digital asset custodians charge ten times the fees traditional institutions demand for their services.
Analysts have also predicted that the custody sector will grow to a multibillion-dollar venture in a few years with a projected 30% yearly increment. Hence, banks are looking to explore the industry’s latent potential.
Meanwhile, the SAB 121 impediments still exist. Despite efforts to repeal the law, President Joe Biden vetoed the proposal. However, market speculators are optimistic that the new administration, after the November elections, will toss off the regulation.
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