BNY Mellon targets crypto ETF custody post-SAB 121 review

Following an exemption from the SEC staff accounting bulletin, BNY Mellon is one step closer to custodial Bitcoin and Ethereum.

BNY Mellon is set to provide crypto custody services for spot Bitcoin (BTC) and spot Ether (ETH) exchange-traded funds on Wall Street, Bloomberg reported. America’s oldest banking institution has moved closer to providing crypto ETF custody following an investigation by the Office of the Chief Accountant at the U.S. Securities and Exchange Commission, the report said.

The review, which apparently granted BNY Mellon an exemption from Staff Accounting Bulletin 121 (SAB 121), means the bank is not required to treat client cryptocurrencies as a corporate liability. This operational shift could allow more traditional banks to safeguard cryptocurrencies, a practice that has been largely unavailable to them until now.

Additionally, BNY Mellon’s holdings of BTC and ETH in crypto ETFs could challenge Coinbase’s dominant position in the market. Coinbase currently holds the digital assets that back many of Wall Street’s spot crypto ETFs, including funds issued by $10 trillion wealth manager BlackRock.

BNY Mellon has been eyeing the crypto custody market since 2023. In January of last year, CEO Robin Vince mentioned digital assets during an earnings call as part of the firm’s long-term strategies.

Bloomberg analysts have estimated that the crypto custody market is growing at 30% annually and is currently worth $300 million. If this growth rate continues, the sector could be valued at over $1 billion by 2032, with annual growth of around $90 million.

But regulatory scrutiny could impact BNY Mellon’s progress and entry into the crypto custody ecosystem. Lawmakers including U.S. Rep. Patrick McHenry and Sen. Cynthia Lummis referenced private meetings between SEC staff and the companies in a bicameral letter to the SEC and three other regulators.

It is presumed that SAB 121 exemptions were discussed in those meetings, but it is not known whether BNY Mellon was reviewed as part of a process that lawmakers have put forward as contentious discussions.