SEC Chairman: Allow Bank of New York Mellon to provide cryptocurrency custody services beyond ETFs

According to Bloomberg, US Securities and Exchange Commission (SEC) Chairman Gary Gensler stated that the architecture used by Bank of New York Mellon (BNY) to provide digital asset custody services is not limited to the Bitcoin and Ethereum exchange traded funds (ETFs) that the bank is considering.

Earlier this week, BNY confirmed that it had submitted a plan to the Office of the Chief Accountant of the SEC to custody these two assets in a way that would protect customer funds in the event of a bank bankruptcy. The agency has expressed "no objection" to the plan, a regulatory term that allows the bank to not worry about its structure violating SEC requirements, which require banks to reflect the value of digital assets they hold on their balance sheets. BNY previously stated to Bloomberg that the SEC's no objection opinion only pertains to the use cases of ETFs.

"Although the actual consultation involves two types of crypto assets, the structure itself does not depend on which type of crypto asset it is." Gensler told Bloomberg after delivering a speech at the Federal Reserve Bank of New York's annual U.S. treasury bond bond market meeting on Thursday: "It does not matter which crypto currency it is."

Gensler stated that the architecture proposed by BNY includes the use of individual cryptocurrency wallets, each with an independent bank account, and prohibits mixing with bank assets. He stated that whether to expand the scope of digital asset use cases suitable for custody depends on the bank's own decision.

Gensler praised BNY's preparation work in ensuring ownership of client assets, ensuring that they are not ranked last in debt repayment in the event of bankruptcy. In recent years, Celsius Network, FTX, Voyager Digital, and other digital asset platforms have gone bankrupt, leaving thousands of cryptocurrency traders in such a predicament.

Gensler said, "If this bank or any other bank uses the same structure, they will receive the same unanimous opinion

Gensler pointed out that multiple banks and brokers have been discussing potential digital asset custody frameworks that can separate client assets from banks, thereby avoiding the requirements of SAB 121. SAB 121 sets out the institution's balance sheet requirements for cryptocurrencies, which have been strongly opposed by the cryptocurrency industry. Earlier this year, US President Joe Biden vetoed congressional efforts to overturn SAB 121.