Global financial services company The Bank of New York Mellon Corp. BK secured an exception from the U.S. Securities and Exchange Commission’s (SEC) contentious SAB 121 rule, paving the way for its entry into the lucrative but largely untapped cryptocurrency custody market.
What Happened: The regulator did not raise any objections to BNY’s plan to safeguard cryptocurrency assets for its exchange-traded product clients, without reflecting these assets on the bank’s balance sheet, Bloomberg reported Tuesday.
This is a significant development considering the ongoing debate around the SEC’s SAB 121 rule, which mandates that companies holding customers' cryptocurrencies must record them on their balance sheets. Banks have been critical of this rule, arguing that it hampers their ability to custody digital assets.
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BNY clarified that the SEC’s non-objection is limited to its ETP use case and does not address the broader issue of SAB 121 restricting bank custody of digital assets. The bank intends to continue its engagement with the Office of the Chief Accountant (OCA) on additional use cases through the OCA’s ‘facts and circumstances’ process.
Why It Matters: A TradFi giant, BNY holds more than $50 trillion in assets as of June 30. Its decision to step into the digital custodian market could be influenced by the successful launch of spot Bitcoin BTC/USD and Ethereum ETH/USD exchange-traded funds (ETFs) earlier this year.
Currently, the market is lop-sided, with Coinbase being the primary custodian for most ETFs. Its hegemony was challenged somewhat after Anchorage Digital Bank secured a role as custodian for the ARK 21Shares Bitcoin ETF ARKB.
This development comes amidst a broader debate around the SEC’s SAB 121 rule. Republican lawmakers from both the Senate and House urged the SEC to retract this controversial accounting rule for cryptocurrency assets.
It is the only cryptocurrency-related legislation to pass through the House and Senate, although it was vetoed by the White House in May.
Price Action: Shares of BNY closed 0.27% lower at $71.87 during Tuesday’s regular trading session, according to data from Benzinga Pro.
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