Trillion-dollar financial giant officially enters BTC ETF custody track, intends to challenge Coinbase

According to Bloomberg News on September 24, after obtaining an exemption from the SEC (U.S. Securities and Exchange Commission), Bank of New York Mellon (BNY Mellon) has taken an important step into the Crypto asset custody market, especially the BTC and Ethereum ETF custody market.

According to reports, Bank of New York Mellon received an exemption from the SEC's Staff Accounting Bulletin No. 121 (SAB121) during a review by the Chief Accounting Office.

The exemption allows banks to classify Crypto assets held by customers differently, meaning they do not need to treat these assets as corporate liabilities.

This operational shift could allow more traditional banks to be able to offer Crypto asset custody services, which they were largely unable to provide before.

This development also enables Bank of New York Mellon to challenge Coinbase's current dominance in Crypto asset management and build on the company's Crypto asset custody ambitions.

The move to provide custody services for spot BTC and Ethereum ETFs could greatly disrupt the current market landscape, as Coinbase oversees most of Wall Street’s Crypto ETFs, including those of major asset managers such as BlackRock, which manages about $10 trillion in assets.

Currently, Coinbase is positioned as the leader in digital asset custody for these funds, but the entry of BNY Mellon could increase competition and provide customers with more options.

Since the beginning of 2023, Bank of New York Mellon has expressed a strong interest in the field of Crypto asset custody.

In January of the same year, CEO Robin Vince emphasized in a financial report conference call that digital assets are part of the company's long-term strategic vision and pointed out the growing demand for digital asset services from institutional clients.

Analysts estimate that the annual growth rate of the Crypto asset custody market is about 30%, and the current valuation is $300 million.

If this growth trajectory continues, the market could exceed $1 billion by 2032, growing by about $90 million per year.

Despite the promising outlook, regulatory challenges remain a major concern for BNY Mellon as it seeks a foothold in the crypto asset custody space.

Lawmakers including Rep. Patrick McHenry and Sen. Cynthia Lummis have expressed concerns about the transparency of interactions between SEC staff and private companies.

In a bicameral letter to the SEC and other regulators, they cited private meetings where the SAB121 exemption was allegedly discussed.

It is unclear whether BNY Mellon’s exemption was part of those discussions, raising questions about the regulatory landscape for the bank’s activities in the crypto asset markets.

BNY Mellon’s success will largely depend on its ability to navigate a complex regulatory environment while capitalizing on growing demand from institutional investors for digital asset services.