BNY Mellon Gains SEC Approval for Bitcoin Custody, Clearing Key SAB 121 Hurdle

• BNY Mellon receives SEC exemption from SAB 121, clearing the way for institutional crypto custody services.
• SEC approval allows BNY Mellon to expand crypto offerings, driving further recognition of Bitcoin as a legitimate asset.
• BNY Mellon may pursue exemption from New York’s BitLicense, citing federal banking law precedence over state regulations.

BNY Mellon, America’s largest custodian bank, has reportedly secured approval from the U.S. Securities and Exchange Commission (SEC) to provide institutional cryptocurrency custody services.

During a Wyoming public hearing, Chris Land, General Counsel to U.S. Senator Cynthia Lummis, revealed that BNY Mellon has been granted an exemption from the SEC’s Staff Accounting Bulletin (SAB) 121. This bulletin requires institutions that hold crypto assets to account for them on their balance sheets. 

BNY Mellon Granted Exemption from SEC Rule

The exemption from SAB 121 clears a notable hurdle for BNY Mellon. This accounting guideline previously presented a challenge for banks wishing to offer cryptocurrency custody services. SAB 121 mandates that entities record crypto assets on their balance sheets, alongside a corresponding liability reflecting the value of the assets. 

The rule, criticized as burdensome by the crypto industry, created challenges for traditional financial institutions. However, BNY Mellon has reportedly received a “variance” from the SEC, allowing the bank to proceed with its digital asset custody plans.

Potential Impact on Institutional Crypto Custody

The SEC’s decision to grant BNY Mellon this exemption could open doors for other financial institutions looking to provide digital asset services. Notably, the approval could pave the way for BNY Mellon and similar banks to offer crypto custody solutions for institutional clients. 

The involvement of a major financial institution like BNY Mellon is a pivotal moment for the cryptocurrency industry. Such developments signal growing institutional recognition of digital assets like Bitcoin as legitimate financial instruments.

BNY Mellon’s Next Steps in Crypto Custody

BNY Mellon’s regulatory clearance might extend beyond the SEC. Chris Land suggested that BNY Mellon may also seek an exemption from New York’s BitLicense, which governs cryptocurrency-related businesses in the state. The bank could argue that federal banking laws take precedence over state regulations. 

Additionally, this move by BNY Mellon, regulated by the Federal Reserve and New York’s Department of Financial Services, signals a larger shift toward integrating cryptocurrency into traditional banking systems.