The banking giant will be able to custody crypto assets for exchange-traded products without being subject to onerous balance sheet requirements.
BNY is the world’s largest custodian bank.
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Posted September 24, 2024 at 9:07 pm EST.
BNY announced Tuesday that the SEC’s Office of the Chief Accountant (OCA) had no objection to the bank not following the agency’s SAB 121 accounting guidance specifically for custodying crypto assets for exchange-traded products (ETPs). SAB 121 generally requires entities custodying such assets to list them as liabilities on their balance sheet, an expensive requirement that has been heavily criticized by the crypto industry.
Unchained confirmed last week that BNY, the largest custodian bank in the world, had been cleared to custody crypto after receiving a “variance” exempting it from the SAB 121 rule. On Tuesday, BNY detailed that its consultation with the SEC resulted in a non-objection to the bank’s determination that the safeguarding of crypto assets for its regulated exchange-traded product clients should not be recognized on BNY’s balance sheet.
As a result of the SEC’s non-objection, BNY is now closer to rolling out custody services for bitcoin and ether ETPs. The bank noted that it already supports 80% of SEC-approved bitcoin and ether crypto-asset exchange-traded products (ETPs) in its fund services business, so providing custody is a natural next step in the bank’s strategic plans for digital assets.
Read more: In the Ongoing SAB 121 Fight, Here’s How Crypto Can Move Forward With Bipartisan Support
BNY specified, however, that the SEC’s non-objection is limited to one use case for the bank—custody for registered crypto-asset ETPs. Therefore, the decision “does not solve the issue of SAB 121 effectively restricting bank custody of digital assets,” BNY said, adding that it plans to continue discussing additional use cases with the SEC.
Other unnamed banks and broker dealers have also received non objections from the SEC, according to a Bloomberg report.
Since launching earlier this year, spot bitcoin exchange-traded funds (ETFs) have attracted close to $60 billion in assets, while spot ether ETFs have amassed more than $7 billion, highlighting the significant opportunities for financial companies to custody these assets.
Coinbase Custody is the custodian for 8 of the 11 spot bitcoin ETFs, according to Coinbase’s website.
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