US Bank BNY Mellon Navigates SEC Review for bitcoin and Ether Custody
US bank BNY is making noteworthy progress in offering custody services for bitcoin and Ether, focusing specifically on its exchange-traded product (ETP) clients. This move comes after a recent Securities and Exchange Commission (SEC) review, which carries significant implications for how financial institutions handle digital assets, as reported by Bloomberg.
The SEC Review and BNY Mellon's Approach
Earlier this year, the SEC's Office of the Chief Accountant conducted a review of BNY Mellon's approach to crypto custody. The outcome of this review revealed that the SEC did not object to BNY Mellon's decision not to include these digital assets as liabilities on its balance sheet.
This review held particular importance due to the SEC's SAB 121 rule, which mandates banks to account for crypto assets they safeguard as both a liability and an asset on their balance sheets. However, BNY Mellon's specific case with ETPs appears to exempt them from this requirement, at least for the time being.
According to BNY Mellon, they have received confirmation from the SEC's Office of the Chief Accountant that they can proceed with not treating digital assets held for SEC-registered crypto-asset ETPs as liabilities on their balance sheet.
Understanding the SAB 121 Rule
The SAB 121 rule was introduced by the SEC to enhance transparency in the financial statements of entities that hold crypto assets for others. It requires these entities to recognize the crypto they hold as liabilities, aiming to provide clarity on the risks associated with managing these assets.
Interestingly, the SEC's decision in this case specifically pertains to BNY Mellon's operations with ETPs, indicating that this solution may not have universal applicability across all crypto custody scenarios, as highlighted in the Bloomberg report.
BNY Mellon's Expansion in crypto Custody and Regulatory Dialogue
BNY Mellon is actively pursuing further engagement with the SEC and other banking regulators to expand its crypto custody services. The bank's ambition is to scale up these services, demonstrating a cautious yet positive approach towards integrating crypto into traditional financial services.
For institutions like BNY Mellon, navigating regulatory frameworks to offer crypto-related services requires ongoing communication with multiple regulatory bodies. While the recent approval is a significant milestone, broader regulatory acceptance remains essential for comprehensive crypto custody services.
BNY Mellon's initiative to provide custody services for bitcoin and Ether, initially targeted at ETP clients, represents a notable advancement. It underscores the evolving relationship between traditional finance and cryptocurrencies, propelled by regulatory clarity but also shadowed by ongoing complexities in accounting and oversight.
As banks continue to explore opportunities in the crypto space, the financial landscape could witness increased integration of digital assets, subject to regulatory adjustments and individual engagements similar to that of BNY Mellon.
