- BNY Mellon got SEC approval for broad crypto custody options
- BNY’s new structure enables customers’ assets security without regulation boundaries
- This is the precedent for other businesses on how to bypass SAB 121 with a violation
Just a couple of days ago we saw US lawmakers show solidarity against the SEC and SAB 121 and the exemption for BNY Mellon.
Already today we are seeing a continuation of this story, where BNY Mellon has been granted permission to crypto custody beyond ETFs, and are preparing to expand their crypto services.
This not only significantly embellishes the bank’s position in the rapidly tokenizing economy, but is becoming a precedent for all other financial institutions and crypto companies.
New Structure for Storing Digital Assets
After the “no objection” against BTC and ETH turned into an authorization for a broad list of crypto assets to be held by exchange-traded fund clients, we find ourselves in the birth of another regulatory space with far-reaching implications, and prospects for BNY in particular.
US Securities and Exchange Commission Chair Gary Gensler:
“Though the actual consultation related to two crypto assets, the structure itself was not dependent on what the crypto was. It didn’t matter what the crypto was.”
This new BNY structure should ensure that user assets are protected in the event of bank insolvency without additional legal regulation so that the FTX story does not repeat itself.
Gensler also notes:
“BNY’s proposed structure includes the use of individual crypto wallets, each of which would have a separate bank account, and would be prohibited from being comingled with bank assets. It’s up to the bank to decide whether to expand the pool of digital asset use cases it’s comfortable custodying.”
He also noted:
“Several banks and brokers have been in discussions about potential digital asset custody structures that would segregate customer assets from the banks and thus could also avoid the requirements of Staff Accounting Bulletin 121.”
Conclusion
The crypto custody market is worth approximately $300 million now and is growing by about 30% yearly, and non-bank providers charging 10 times more for the service compared to costs for more traditional assets which may serve as a call to action for many entrepreneurs.
This is a precedent and changes the approach to the legal field, opening up many options for other financial institutions.
