According to Bloomberg, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said that the structure used by Bank of New York Mellon (BNY) to provide digital asset custody services is not limited to Bitcoin, which the bank is considering. and Ethereum exchange-traded funds (ETFs).
Earlier this week, BNY confirmed it had submitted a plan to the SEC's Office of the Chief Accountant to custody the two assets in a way that would protect customer funds in the event of a bank failure. The agency expressed "no objection" to the plan, regulatory language that frees the bank from worrying that its structure would violate SEC requirements that banks reflect the value of the digital assets under their custody on their balance sheets. BNY previously told Bloomberg that the SEC’s no-objection opinion addressed only the use case for ETFs.
“While the actual consultation involves two crypto-assets, the structure itself does not depend on which crypto-asset it is,” Gensler told Bloomberg in an interview after speaking at the Federal Reserve Bank of New York’s annual U.S. Treasury Market Conference on Thursday. It doesn’t matter which cryptocurrency it is.”
Gensler said BNY’s proposed architecture includes the use of individual cryptocurrency wallets, each of which would have a separate bank account and prohibit commingling with bank assets. He said it was up to the banks themselves to decide whether to expand the range of use cases for digital assets suitable for custody.
Gensler praised BNY’s preparations in securing ownership of clients’ assets, ensuring they would not be last in line to pay their claims in the event of a bankruptcy. Thousands of cryptocurrency traders have found themselves in this predicament as Celsius Network, FTX, Voyager Digital and other digital asset platforms have collapsed in recent years.
"This bank or any other bank, if they used the same structure, they would get the same no-objection opinion," Gensler said.
Gensler noted that multiple banks and brokers have been discussing potential digital asset custody structures that could keep client assets separate from banks and avoid the requirements of Staff Accounting Bulletin No. 121 (SAB 121). SAB 121, which sets out the agency’s balance sheet requirements for cryptocurrencies, has faced strong opposition from the cryptocurrency industry. Earlier this year, President Joe Biden blocked congressional efforts to overturn SAB 121.
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