Breaking: US SEC Greenlights BNY Mellon’s New Crypto Custody Plan

The US Securities and Exchange Commission (SEC) has given the green light to Bank of New York Mellon Corp (BNY Mellon) to offer services in relation to digital assets, which may go beyond Bitcoin and Ether ETFs. SEC Chair Gary Gensler said that the approach that BNY Mellon is implementing is not restricted to particular cryptos which opens door to other digital assets.

US SEC Greenlights BNY Mellon’s Crypto Custody Plan

In a Bloomberg report, the US SEC has apparently approved a ‘non-objection’ to BNY Mellon’s proposed custody model wherein the bank can hold digital assets without breaching regulatory norms. As part of the plan, BNY Mellon is proposed to offer each client a separate crypto wallet linked to a bank account in order to avoid the risks of the bank’s bankruptcy. 

This has been done in a bid to ensure that customer assets are not blended with those of the bank as a way of meeting the set legal requirements.

Gary Gensler mentioned that while BNY Mellon’s conversation with the US Securities and Exchange Commission was first centered on Bitcoin and Ether, the structure that was approved is flexible and is not limited to these two cryptocurrencies. This allows for BNY Mellon to possibly expand its offering of custody services to other types of digital assets at the discretion of the bank and within the boundaries of the regulatory framework.

BNY Mellon’s Custody Plan Aimed at Protecting Client Assets

The structure approved by the US Securities and Exchange Commission emphasizes asset protection, a critical concern for digital asset custody. Gensler praised BNY Mellon for its comprehensive approach to ensuring that customer assets remain protected, even in a bankruptcy scenario. 

This approval comes at a time when many crypto traders have been caught in insolvency issues with other platforms like Celsius Network, FTX, and Voyager Digital.

As such, BNY Mellon’s approach may be considered as an example that other financial institutions may follow when it comes to digital assets custody. The SEC Chair said that any other bank that wants to implement a similar structure would be given the same regulatory consideration. Nevertheless, the banks will still require the nod of their prudential supervisors before they venture into the provision of digital asset custody services.

SAB 121 Accounting Rules Remain a Point of Contention

The approval had attracted criticism from stakeholders in the crypto industry claiming that BNY Mellon was given special consideration. Under SAB 121, institutions are mandated to include the value of custodial crypto assets on their balance sheet together with an equivalent liability, a practice unpopular among many in the industry. 

BNY Mellon, however, has been said to have been given some flexibility on these rules, which has elicited resentments from the crypto enthusiasts and other financial institutions.

Moreover, the US SEC Commissioner Hester Peirce and other market participants complained for the bias arguing that SAB 121 no-action relief granted to BNY Mellon does not apply to other institutions. Some of the critics, such as the CEO of Custodian Bank, Caitlin Long stated that these rules are not consistent applied as regulators are assisting the large banks while complicating the process to the others.