In a recent statement to Bloomberg, SEC Chair Gary Gensler discussed BNY Mellon’s innovative crypto custody structure, highlighting its potential to be adapted for a variety of digital assets beyond just Bitcoin and Ether. Gensler clarified that while the current approval is specific to Bitcoin and Ether ETFs, the underlying structure can be applied to any digital asset.
Speaking on the matter, Gensler emphasized, “The structure itself was not dependent on what the crypto was, it didn’t matter what the crypto was.” This flexibility means that BNY Mellon could expand its custody services to encompass a wider range of digital assets in the future, paving the way for other financial institutions to adopt similar models for crypto custody.
The key to obtaining approval from the SEC lies in BNY’s use of individual crypto wallets, ensuring the protection and segregation of customer assets from the bank’s own assets in the event of insolvency. This secure wallet structure, developed in collaboration with the SEC’s Office of Chief Accountant, was crucial in securing the agency’s “non-objection” decision.
By complying with regulatory requirements and addressing concerns around asset protection during bankruptcy, BNY Mellon’s approved approach sets a standard for the industry, mitigating risks that have plagued other crypto platforms in the past. This certification of compliance not only safeguards customer assets but also opens up new revenue streams for financial institutions in the burgeoning crypto custody market, estimated to be valued at $300 million and growing at a rate of 30% annually.
With traditional non-bank providers charging higher fees for digital asset custody, banks like BNY Mellon are in a prime position to meet the rising demand for secure and regulated crypto custody solutions, ultimately shaping the future of institutional involvement in the crypto space.
