SEC Greenlights BNY Mellon's Crypto Custody Expansion Beyond ETFs

The U.S. Securities and Exchange Commission (SEC) has given the Bank of New York Mellon Corporation (BNY Mellon) the green light to expand its crypto custody services beyond the realm of crypto ETFs. SEC Chair Gary Gensler shared this major development on Thursday after addressing an audience at the Federal Reserve Bank of New York.

BNY Mellon, one of the world’s largest custodian banks with a staggering $49 trillion in assets under its control, now has SEC approval to offer comprehensive crypto custody services. The bank, which already manages $2 trillion in crypto assets, was granted a “non-objection” status by the SEC, enabling it to move forward with its plans to safeguard customer funds in the world of digital currencies.

Historically, BNY Mellon's crypto custody services have included popular crypto ETFs like Bitcoin and Ethereum. However, the bank recently submitted a proposal to the SEC’s Office of the Chief Accountant, aiming to extend these services to include direct custody of these digital assets. This move ensures that customer funds are protected in the event of the bank facing insolvency, providing an added layer of security to crypto investors.

Gary Gensler shed light on the process, explaining that while BNY’s consultation initially focused on just Bitcoin and Ethereum, the structure was designed to be adaptable to any cryptocurrency. "It didn’t matter what the crypto was," Gensler emphasized in an interview with Bloomberg News on Thursday.

A notable aspect of BNY Mellon's custody proposal is the introduction of individual crypto wallets. Each wallet will be associated with a separate bank account, ensuring that customer assets are not mixed with the bank's own holdings. This structure offers a higher level of security and transparency, a feature that Gensler highlighted as being open to adoption by other banks that present similar structures. “This bank, or any other bank if they came in with the same structure would get the same non-object,” Gensler clarified.

In addition to BNY’s initiative, Gensler acknowledged that other banks and brokers are also actively exploring their own digital asset custody solutions. He commended BNY Mellon for paving the way, saying the bank has done the “legwork” necessary to establish a framework that ensures customer assets remain protected.

BNY Mellon, a financial giant that came into existence through the 2007 merger of the Bank of New York and Mellon Financial Corporation, continues to strengthen its position as a leader in the world of crypto asset management. With the SEC’s approval, the bank is now well-positioned to offer even more comprehensive crypto services to its clients, potentially reshaping the landscape of digital asset custody.