Big Banks & Bitcoin: BNY Mellon Gets the Green Light, but at What Cost?

• BNY Mellon gets SEC approval to offer Bitcoin and digital asset custody services.
• Concerns arise over Bitcoin’s decentralization as major banks enter crypto custody.
• SEC exemptions under SAB 121 prompt mixed reactions from the crypto community.

BNY Mellon, a major global asset custodian, secured approval from the U.S. Securities and Exchange Commission (SEC) to provide Bitcoin and other digital asset custody services, on September 20, 2024. The approval allows the $49 trillion asset custodian to hold not only Bitcoin but also various digital assets.

The SEC granted BNY Mellon a variance from Staff Accounting Bulletin (SAB) 121. This regulation initially posed challenges for banks wanting to enter the crypto custody space, requiring them to list digital assets as liabilities on their balance sheets.

Centralization Concerns Arise

While many celebrate BNY Mellon’s achievement, some in the crypto market are expressing worries. Bitcoin, designed to operate outside traditional financial systems and remain decentralized, now has a major central bank involved.

Some argue that this move could undermine Bitcoin’s decentralized principles, as large financial institutions like BNY Mellon take on a significant role in overseeing and handling digital assets.

Read also: BNY Mellon Allows Selected Clients To Hold, Transfer BTC and ETH

The crypto community has responded to this news with a mix of opinions. Users on platforms like X (formerly Twitter) have hailed this approval as a big step forward for Bitcoin and the broader crypto market.

Additionally, SEC Chief Accountant Paul Munter commented on the conditional exemptions granted under SAB 121 during a speech , mentioning that various institutions, including BNY Mellon, have been given the go-ahead to use Blockchain technology for tracking and moving traditional financial assets.

Munter stressed that the exemptions were granted with specific conditions, such as state regulatory collaboration and customer protection during bankruptcy.

Ongoing Challenges and Criticisms in Crypto Custody

Even with the SEC’s approval for BNY Mellon, the crypto custody space remains a hot topic. Wyoming Select Committee Chair Cyrus Western voiced frustration over what he perceives as double standards in the industry.

Western pointed out that companies like Custodia are facing ongoing legal battles, especially with the Federal Reserve, over denied master accounts, putting them at a disadvantage. He further criticized the SEC for favoring traditional banks over crypto-native firms that have diligently worked to comply with regulations.