BNY Mellon is making significant moves towards providing custody services for cryptocurrency ETFs following an exemption from an SEC staff accounting bulletin. This development means that the banking giant is getting closer to offering custodial services for spot Bitcoin and spot Ether exchange-traded funds on Wall Street, as reported by Bloomberg.
The recent review by the Office of the Chief Accountant at the U.S. Securities and Exchange Commission granted BNY Mellon a Staff Accounting Bulletin 121 (SAB 121) exemption. This exemption relieves the bank from considering customer crypto as a corporate liability, paving the way for more traditional banks to enter the cryptocurrency custody market.
With this operational shift, BNY Mellon could potentially challenge Coinbase’s dominant position in the market. Currently, Coinbase holds the digital assets that back most of Wall Street’s spot crypto ETFs, including those issued by the $10 trillion wealth manager BlackRock.
BNY Mellon has been eyeing the crypto custody market since 2023, with CEO Robin Vince mentioning digital assets as part of the firm’s long-term strategies during an earnings call in January last year. According to Bloomberg analysts, the crypto custody market is growing at a rate of 30% annually and is currently valued at $300 million. If this growth continues, the sector could surpass $1 billion by 2032, with an annual increase of approximately $90 million.
Despite these positive developments, regulatory scrutiny remains a potential obstacle for BNY Mellon. Lawmakers such as U.S. Representative Patrick McHenry and Senator Cynthia Lummis have raised concerns about private meetings between SEC staff and companies, including discussions around SAB 121 exemptions. In a letter addressed to the SEC and three other regulators, they questioned the legitimacy of these meetings and whether BNY Mellon’s review was part of these questionable discussions.
As BNY Mellon navigates the regulatory landscape and solidifies its position in the crypto custodial ecosystem, the banking giant’s foray into providing custody services for cryptocurrency ETFs could have far-reaching implications for the industry. With the market poised for significant growth in the coming years, BNY Mellon’s strategic moves could shape the future of cryptocurrency custody on Wall Street and beyond.
