According to Bloomberg News on September 24, after obtaining an exemption from the SEC (U.S. Securities and Exchange Commission), Bank of New York Mellon (BNY Mellon) has taken an important step into the Crypto asset custody market, especially the BTC and Ethereum ETF custody market.
The bank received an exemption from SEC Staff Accounting Bulletin No. 121 (SAB121) during its review by the Office of the Chief Accounting Officer, the report said.
The exemption allows banks to classify crypto assets held by clients differently, meaning they do not need to treat them as corporate liabilities.
This operational shift could allow more traditional banks to offer crypto asset custody services, something they have been largely unable to do before.
This development also positions BNY Mellon to challenge Coinbase’s current dominance in crypto asset management and builds further on the company’s crypto asset custody ambitions.
The move to provide custody services for spot BTC and Ethereum ETFs could significantly disrupt the current market landscape as Coinbase oversees most of Wall Street’s Crypto ETFs, including those from major asset managers like BlackRock, which manages around $10 trillion in assets.
Currently, Coinbase is positioned as the leader in digital asset custody for these funds, but the entry of BNY Mellon could increase competition and provide more options for customers.
Since the beginning of 2023, Bank of New York Mellon has expressed a strong interest in the field of Crypto asset custody.
In January of the same year, CEO Robin Vince emphasized in an earnings call that digital assets are part of the company's long-term strategic vision and pointed out the growing demand for digital asset services from institutional clients.
Analysts estimate that the Crypto asset custody market is growing at approximately 30% annually and is currently valued at $300 million.
If this growth trajectory continues, the market size will exceed $1 billion by 2032, growing by approximately $90 million per year.
Despite the promising prospects, regulatory challenges remain a major concern for BNY Mellon as it seeks a foothold in the crypto asset custody space.
Lawmakers including Rep. Patrick McHenry (D-Calif.) and Sen. Cynthia Lummis (R-Ill.) have expressed concerns about transparency in interactions between SEC staff and private companies.
In a bicameral letter to the SEC and other regulators, they cited private meetings where the SAB121 exemption was allegedly discussed.
It is unclear whether BNY Mellon’s exemption was part of those discussions, raising questions about the regulatory landscape surrounding the bank’s activities in crypto asset markets.
BNY Mellon’s success will largely depend on its ability to navigate the complex regulatory environment while capitalizing on growing demand from institutional investors for digital asset services.
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