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BNY Mellon, America’s largest custodian bank, appears to have received SEC approval to offer institutional crypto custody services, according to testimony at a Wyoming public hearing.
Testimony from Chris Land, general counsel for US Senator Cynthia Lummis, indicated that BNY Mellon had received a “variance” from complying with the SEC’s Staff Accounting Bulletin (SAB) 121. These guidelines were previously seen as a major hurdle for banks looking to enter the crypto custody business.
This variance could clear the way for BNY Mellon and other banks to start offering crypto custody services to institutional clients.
“[BNY] is looking to get more involved in the crypto custody business,” Land stated. “They had some problems with SAB 121, and the SEC has apparently given them some kind of variance from SAB 121 to move forward.”
SAB 121 requires entities that custody crypto assets to list the assets on their balance sheet and create a corresponding liability equal to the value of the assets held. The crypto industry has long criticized the rule as overly burdensome.
However, BNY Mellon, which is regulated by the Federal Reserve and New York’s Department of Financial Services, may have found a path forward, with the SEC and Federal Reserve apparently giving a non-objection to BNY’s digital assets custody plans.
Chris Land also suggested that BNY Mellon might argue for an exemption from New York’s BitLicense, which regulates crypto businesses in the state. According to Land, the bank is likely to argue that federal banking laws provide preemption over state laws like the BitLicense.
BNY Mellon offering crypto custody services could be a pivotal moment for institutional crypto adoption. Its entry signals recognition of Bitcoin and other digital assets as legitimate financial instruments, further reinforcing Bitcoin’s status as “real money” in global finance.
Michael Saylor endorsed the news, sharing his thoughts on X. Saylor mentioned that credible rumors are circulating that one or more major US banks will soon be able to custody Bitcoin.
BNY Mellon’s involvement in crypto custody raises concerns within the Bitcoin community, as Bitcoin was originally designed as a decentralized currency to bypass traditional financial systems, especially large banks.
The idea of a major financial institution acting as a custodian for Bitcoin may seem contrary to the cryptocurrency’s core ethos, which aimed to resist centralization and control. Some argue that BNY Mellon’s move undermines Bitcoin’s founding principles by integrating it into the very system it sought to challenge.