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BNY Mellon Receives SEC's Approval to Offer ETF Crypto Custody Service
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The Bank of New York Mellon Corporation (BK - Free Report) has obtained a “no-objection” from the US Securities and Exchange Commission (SEC) regarding its request to safeguard digital assets such as bitcoin and ether without the need to classify them as balance-sheet liabilities. This will enable the bank to enter into bitcoin and ether crypto-custody market for spot exchange-traded funds (ETF) clients, as reported by Bloomberg.
Implications of BK’s “No-Objection”
The SEC’s non-objection deals with the challenges posed by the requirement that banks need to hold cryptocurrencies on behalf of clients and report them as balance sheet liabilities. This is considered restrictive by numerous financial institutions. BK is now able to provide custody services without this burden.
The SEC’s approval depends on BNY Mellon’s use of individual crypto wallets, which guarantees that customer assets are safeguarded and kept aside from the bank’s assets in case of insolvency.
The SEC chair Gary Gensler, in an interview with Bloomberg, suggested that BK’s crypto custody model could extend to numerous digital assets. “Though the actual consultation related to two crypto assets, the structure itself was not dependent on what the crypto was, it didn’t matter what the crypto was,” he further stated.
He emphasized that the SEC’s non-objection addresses the issues about the custody structure itself, rather than the nature of the assets, which potentially enables other banks to replicate a similar model for crypto custody and also expand their digital assets custody offerings.
BNY Mellon’s Strategic Rationale Behind This Move
This move establishes BK in a competitive position in the crypto custody domain, aiming for institutional clients who seek secure and compliant ways to invest in digital assets via ETFs. The company’s significant experience in asset custody, combined with its rapport and regulatory adherence, could make it a lucrative alternative to existing crypto custodians.
Per Bloomberg estimates, the crypto custody market is worth roughly $300 million while growing at an annual rate of almost 30%. This makes the sector attractive as custody providers often earn significantly higher fees compared with traditional assets due to the high-security risks involved.
This move aligns with BK’s growth strategy to enhance its offerings. Earlier this month, the bank introduced the Alts Bridge platform, which is set to be launched to boost alternative and private market investment products. In June, it announced a bundled offering, enabling advisors to gain accessibility to a wide range of capabilities across BNY Mellon’s leading platforms. Similarly, the bank launched customized tax solutions to help advisors choose the best strategy aligning with their interests.
BK’s Zacks Rank & Price Performance
Shares of BNY Mellon have rallied 25.9% over the past six months, outperforming the industry’s growth of 5.4%.
Last week, BlackRock, Inc. (BLK - Free Report) and Banco Santander, S.A. (SAN - Free Report) signed a memorandum of understanding, under which funds and accounts managed by BLK will invest up to $1 billion per year in select project finance, energy finance and infrastructure debt investment opportunities with Santander through structured transaction formats.
In a transaction in April, BLK agreed to provide financing on a $600 million diversified portfolio of infrastructure credit from SAN.
The latest agreement comes as the asset manager continues its expansion into infrastructure this year.
Similarly, Citigroup Inc. (C - Free Report) and Apollo Global Management inked a deal to establish a $25-billion private credit, direct lending program. The program will initially focus on North America, potentially expanding to additional geographies.
With a scope and size that may guarantee finance for strategic transactions, the program aims to greatly expand corporate and sponsor clients' access to the private lending capital pool. Through the program, Apollo's scalable, substantial capital base will be combined with Citigroup's broad banking client reach, origination and capital market capabilities.
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BNY Mellon Receives SEC's Approval to Offer ETF Crypto Custody Service
The Bank of New York Mellon Corporation (BK - Free Report) has obtained a “no-objection” from the US Securities and Exchange Commission (SEC) regarding its request to safeguard digital assets such as bitcoin and ether without the need to classify them as balance-sheet liabilities. This will enable the bank to enter into bitcoin and ether crypto-custody market for spot exchange-traded funds (ETF) clients, as reported by Bloomberg.
Implications of BK’s “No-Objection”
The SEC’s non-objection deals with the challenges posed by the requirement that banks need to hold cryptocurrencies on behalf of clients and report them as balance sheet liabilities. This is considered restrictive by numerous financial institutions. BK is now able to provide custody services without this burden.
The SEC’s approval depends on BNY Mellon’s use of individual crypto wallets, which guarantees that customer assets are safeguarded and kept aside from the bank’s assets in case of insolvency.
The SEC chair Gary Gensler, in an interview with Bloomberg, suggested that BK’s crypto custody model could extend to numerous digital assets. “Though the actual consultation related to two crypto assets, the structure itself was not dependent on what the crypto was, it didn’t matter what the crypto was,” he further stated.
He emphasized that the SEC’s non-objection addresses the issues about the custody structure itself, rather than the nature of the assets, which potentially enables other banks to replicate a similar model for crypto custody and also expand their digital assets custody offerings.
BNY Mellon’s Strategic Rationale Behind This Move
This move establishes BK in a competitive position in the crypto custody domain, aiming for institutional clients who seek secure and compliant ways to invest in digital assets via ETFs. The company’s significant experience in asset custody, combined with its rapport and regulatory adherence, could make it a lucrative alternative to existing crypto custodians.
Per Bloomberg estimates, the crypto custody market is worth roughly $300 million while growing at an annual rate of almost 30%. This makes the sector attractive as custody providers often earn significantly higher fees compared with traditional assets due to the high-security risks involved.
This move aligns with BK’s growth strategy to enhance its offerings. Earlier this month, the bank introduced the Alts Bridge platform, which is set to be launched to boost alternative and private market investment products. In June, it announced a bundled offering, enabling advisors to gain accessibility to a wide range of capabilities across BNY Mellon’s leading platforms. Similarly, the bank launched customized tax solutions to help advisors choose the best strategy aligning with their interests.
BK’s Zacks Rank & Price Performance
Shares of BNY Mellon have rallied 25.9% over the past six months, outperforming the industry’s growth of 5.4%.
Image Source: Zacks Investment Research
Currently, BK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Restructuring Initiatives by Other Finance Firms
Last week, BlackRock, Inc. (BLK - Free Report) and Banco Santander, S.A. (SAN - Free Report) signed a memorandum of understanding, under which funds and accounts managed by BLK will invest up to $1 billion per year in select project finance, energy finance and infrastructure debt investment opportunities with Santander through structured transaction formats.
In a transaction in April, BLK agreed to provide financing on a $600 million diversified portfolio of infrastructure credit from SAN.
The latest agreement comes as the asset manager continues its expansion into infrastructure this year.
Similarly, Citigroup Inc. (C - Free Report) and Apollo Global Management inked a deal to establish a $25-billion private credit, direct lending program. The program will initially focus on North America, potentially expanding to additional geographies.
With a scope and size that may guarantee finance for strategic transactions, the program aims to greatly expand corporate and sponsor clients' access to the private lending capital pool. Through the program, Apollo's scalable, substantial capital base will be combined with Citigroup's broad banking client reach, origination and capital market capabilities.