BNY Mellon, a leading custody bank in the US, has received approval from the Securities and Exchange Commission (SEC) to hold crypto beyond Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETF). This means the firm can hold a wider range of crypto assets thanks to one special designation.
Itâs the non-objective status, which means the SEC reviewed the bankâs custody framework and didnât object to it. Therefore, from now on, the firm has the green light to expand its crypto asset framework.
Related: US Spot Bitcoin ETFs On Track to Hold One Million BTC
Gary Gensler told Bloomberg:
Advertisement
Though the actual consultation related to two crypto assets, the structure itself was not dependent on what the crypto was, it didnât matter what the crypto was.
Gary Gensler
Interestingly, this designation is an exception to SAB 121, which is another controversial crypto rule that, explained simply, makes it harder for traditional banks to offer crypto custody services.
SAB 121 requires companies to recognise liabilities for obligations to safeguard crypto assets they hold for others, record these assets at their current market value, and disclose the associated risks.
As a result, this leads to increased liabilities on balance sheets as companies must account for both the crypto assets and the corresponding obligations. This translates into larger balance sheets, elevated costs due to more complex accounting practices, and increased operational burdens from additional accounting requirements.
Potential Market Expansion for Traditional Banks
Anyway, what does this mean for the industry? It means banks like BNY Mellon have an opportunity to offer more competitive fees compared to non-bank services like Coinbase Custody, which recently got into some hot water with BlackRock due to rumours of issuing paper bitcoin.
These non-bank services charge ten times for the service compared to costs for more traditional assets, according to Bloomberg. Further, the crypto custody market is worth around US$300M (AU$436M) and is growing by 30% yearly.
Related: SEC Approves Options Trading for BlackRock BTC ETF, Hereâs Why Thatâs Bullish
This is quite an interesting development for the crypto industry because it could mean the blueprint for other banks to follow suit while still operating in the confines of the law. It also suggests Gensler is probably taking it easier after being grilled in a hearing yesterday due to his questionable approach towards crypto regulation.