Bitcoin broke through $64,500, reaching a high of $64,589. Wall Street is interested in digital asset revenue, and the Bank of New York plans to custody cryptocurrency ETFs. The bank does not need to comply with SAB 121 rules for cryptocurrency ETF clients, and the bank recognizes custody of cryptocurrencies in its balance sheet according to the rules.
BNY Mellon to “custodian” cryptocurrency ETF
Bank of New York Mellon Corp. is moving toward launching custody services for ETF clients’ bitcoin and ether holdings after a review that allowed the firm to avoid treating the assets as balance sheet liabilities.
The bank said in a statement on Tuesday that a review conducted earlier this year by the U.S. Securities and Exchange Commission’s (SEC) Office of the Chief Accounting Officer did not object to the New York bank’s decision that crypto asset coverage for its regulated exchange-traded product customers should not be recognized on its balance sheet.
The SEC’s SAB 121 rule imposes balance sheet requirements to identify risks associated with crypto, but banks argue that it would prevent them from custodial digital assets, a potentially lucrative business. BNY Mellon said the accounting firm’s decision was in response to financial institutions’ use of ETFs.
As such, BNY Mellon said the non-objection does not resolve the issue of SAB 121’s effective restrictions on banks’ custody of digital assets, adding that it will similarly engage with the OCA on other use cases through the OCA’s facts and circumstances process, where appropriate.
In addition to the SEC, banks seeking to engage in cryptocurrency custody services will need to obtain approval from other regulators.
“The Bank of New York has and will continue to work with its banking regulators to provide large-scale custody services to cryptocurrency ETF clients,” BNY Mellon told Bloomberg in an emailed statement.
Due to the growing concern about hacking attacks, which have cost the digital asset industry billions of dollars, providers can charge up to 10 times more for the custody of cryptocurrencies compared to traditional assets. It is estimated that the cryptocurrency custody market is currently worth about $300 million and is growing at a rate of about 30% per year.
The Bank of New York announced in 2022 that its digital asset custody infrastructure was technically ready, but SAB 121 made the provision of the service challenging. In early 2024, President Biden vetoed Congress's efforts to overturn SAB 121.
The Chief Accounting Office has not raised objections to some other financial institutions in recent months. An SEC spokesman said: "Certain broker-dealers and custodian banks have fully demonstrated to the SEC staff that their fact patterns differ from those described in SAB 121."
The SEC said the firms must ensure that customers retain ownership of their assets even in the event of bankruptcy or liquidation. “In such cases, their balance sheet treatment is the same as in custodial arrangements, as long as their customers receive the same protections with respect to crypto assets as in custodial arrangements,” the regulator added.
BNY Mellon, a giant in traditional markets with more than $50 trillion in assets under management as of the end of June, said: “There is strong demand for bank-qualified digital asset custodians.”
According to the company, the New York bank has supported 80% of SEC-approved bitcoin and ether ETF products through its fund services business. Providing cryptocurrency custody will enable clients to access solutions.
The launch of a U.S. spot bitcoin exchange-traded fund earlier this year highlighted opportunities in the cryptocurrency custody space. More than a dozen products from firms including BlackRock Inc. and Fidelity Investments have amassed about $58 billion in assets. Similar products for ether have amassed more than $7 billion in assets.
Bank of New York Mellon’s planned foray into cryptocurrency ETP custody will create stiffer competition for current major U.S. ETF custodians such as market leader Coinbase Global Inc.
Digital asset regulation has become an election issue in the United States, with crypto companies pushing back against SEC Chairman Gary Gensler’s allegations of willful noncompliance. Republican candidate Donald Trump has publicly courted the industry, while Democratic candidate Vice President Kamala Harris has vowed to help increase investment in artificial intelligence (AI) and cryptocurrencies with proper protections.
Gensler is scheduled to appear before the House Financial Services Committee on Tuesday at a hearing on oversight by securities regulators.
Saylor: 4 reasons why Bitcoin continues to soar
Michael Saylor, CEO of MicroStrategy, a US-listed giant, predicts that the price of Bitcoin will continue to rise for four reasons. First, large companies such as BlackRock position Bitcoin as "digital gold" and use modern technology to promote its value storage potential to investors. Second, the Federal Reserve's loose monetary policy makes Bitcoin an attractive inflation hedge.
Third, institutional investors such as Bank of New York Mellon may soon offer Bitcoin custody services, simplifying the onboarding process for investors. Finally, Saylor noted that BlackRock has approved the Bitcoin ETF ladder, and expects clearer regulatory guidance after the U.S. presidential election. These factors strengthen institutional adoption and increase investor confidence in the future growth of Bitcoin.
Bitcoin Technical Analysis
Cryptonews reported that Bitcoin showed resilience around $63,875 and remained above the key pivot point of $63,110. Driven by increased investor confidence, the market is gradually recovering from the recent downturn.
The price action is hovering in a tight consolidation zone with the $63,875 price level being the focus of buyers. The 50-period EMA at $63,072 is providing solid dynamic support, strengthening the uptrend in Bitcoin.
On the upside, the immediate resistance is at $64,400. If the buyers break through this threshold, the next key resistance levels are $65,300 and $66,060.
Bitcoin has recently risen steadily above the uptrend line, which shows that the market is preparing for further gains by breaking through these resistance levels. On the downside, the immediate support is at $63,072, followed by $62,600 and $62,379.
The RSI is at 52, which indicates neutral momentum but slightly biased towards the bullish side. A break above the 60 mark would indicate stronger upward momentum.
The 50-period EMA holds firm at $63,072 and provides key support for the ongoing bullish narrative as long as the price remains above this level.
Bitcoin is stabilizing and holding the support near $63,875. A breakout above $64,419 will be a bullish sign, while a break below $63,072 could signal short-term weakness.
