Anticipated Statement from SEC Chairman Gary Gensler: BNY, One of the Largest Banks in the USA, Received Cryptocurrency Custody Approval

SEC Chairman Gary Gensler said that major US bank BNY has been approved by the SEC for crypto custody beyond ETFs.

SEC Chairman Gary Gensler confirmed that the custody structure that BNY is developing can support a broader range of digital assets.

Earlier this week, BNY filed a plan with the SEC’s Office of the Chief Accountant that aims to protect client funds in the event of bankruptcy while storing Bitcoin and Ethereum. The SEC granted BNY a “no objection” status, which reassured the bank that its custody structure complies with regulatory requirements regarding the valuation of digital assets on its balance sheet. BNY had previously stated that this approval was specifically related to its ETF initiative.

“While the actual consultation was about two crypto assets, the structure itself was not tied to what the crypto was,” Gensler told Bloomberg News after speaking at the New York Fed’s annual U.S. Treasury Market Conference. “It didn’t matter what the crypto was.”

The custody structure proposed by BNY involves the use of individual crypto wallets that maintain separate bank accounts, ensuring those assets do not mix with the bank’s own funds. Gensler said it is up to BNY to determine the extent of digital assets it is willing to store.

Gensler commended BNY for its efforts to ensure the protection of client assets, noting the importance of protecting client funds, especially after many investors faced difficulties following the collapse of platforms such as Celsius Network, FTX and Voyager Digital.

“If this bank or any other bank had come in with the same structure, they would have been treated equally impartially,” Gensler added.

It’s also worth noting that banks must obtain approval from prudential regulators before offering custody services for digital assets. Gensler explained that various banks and brokerages are exploring potential custody structures that would separate client assets from those of banks and potentially circumvent the SEC’s “Staff Accounting Bulletin 121.” The bulletin outlines specific balance sheet requirements for cryptocurrencies, which have drawn criticism from the industry, particularly after President Joe Biden vetoed Congress’s repeal efforts earlier this year.

*This is not investment advice.