- America’s oldest bank, BNY Mellon, is advancing towards offering custodial services for exchange-traded fund (ETF) clients, based on recent developments reported by Bloomberg.
- The bank’s move follows a review that allowed them to avoid treating the assets as a balance-sheet liability, thus clearing some regulatory hurdles.
- In a statement, BNY Mellon noted that the SEC’s Office of the Chief Accountant did not object to their determination regarding the safeguarding of crypto assets for ETF clients.
BNY Mellon is poised to disrupt the crypto custody market by offering new custodial services for ETF clients, signaling a significant shift in the industry.
BNY Mellon’s Pioneering Move in Crypto Custody
BNY Mellon is on the brink of launching custodial services for crypto ETF clients, a significant step forward in its digital assets strategy. The bank has received clearance from the SEC, specifically from the Office of the Chief Accountant, which did not challenge BNY Mellon’s determination around balance-sheet liabilities. This regulatory green light is crucial as it removes a major obstacle, enabling BNY Mellon to proceed with its plans.
Implications for the Crypto Custody Market
BNY Mellon’s entry into the crypto custody market represents a potential game-changer, especially for the existing players in the space. Currently, Coinbase dominates the U.S. market for custodial services to spot bitcoin ETFs, including prominent ones issued by BlackRock. With BNY Mellon’s vast resources and longstanding reputation, its involvement could intensify competition and possibly alter market dynamics. According to Bloomberg, the crypto custody market is valued at about $300 million and is witnessing a growth rate of approximately 30% annually. This expansion is partly driven by the higher fees associated with safeguarding digital assets compared to traditional ones, due to inherent security risks.
Strategic Long-Term Vision
BNY Mellon’s interest in digital assets is not new; the bank has been vocal about its long-term commitment in this space. CEO Robin Vince emphasized the bank’s dedication to digital assets during an earnings call in January 2023, highlighting this as a critical part of their future strategy. By moving into crypto custody, BNY Mellon is not only keeping pace with market trends but also leveraging its extensive experience in fund services. As reported by Bloomberg, BNY Mellon already supports 80% of SEC-approved bitcoin and ether exchange-traded products through its existing fund services division.
Conclusion
BNY Mellon’s impending entry into the crypto custody market is set to be a significant development with far-reaching implications. By navigating regulatory challenges and gaining SEC support, the bank is well-positioned to offer custodial services that could vie with current market leaders. This move underscores BNY Mellon’s commitment to digital assets and signals a broader acceptance and integration of crypto in traditional financial services. As the market continues to evolve, stakeholders will likely see increased competition and innovation in the custodial services sector.
