Is US SEC Favouring BNY Mellon on Crypto Custody? Hester Pierce Thinks So
Banking giant BNY Mellon has moved a step closer to offering custodial services to crypto ETF issuers. As per the Tuesday report, BNY Mellon will now be able to provide custody for BTC and ETH to its exchange-traded clients. However, crypto industry veterans including SEC Commissioner Hester Pierce have stated that BNY Mellon is getting preferential treatment while the Federal Reserve tries to crack down on other regulated financial institutions from offering crypto custody.
Why is the US SEC Favoring BNY Mellon?
As reported by CoinGape last week, the US SEC gave a nod for BNY Mellon to offer crypto custody by exempting some of the SAB 121 accounting rules specifically applicable to crypto custodians.
There’s been a strong dissent in the crypto community towards this development. Caitlin Long, the CEO of crypto-friendly Custodian Bank has openly called out this unfair treatment. Commenting on BNY Mellon’s plans to enter the crypto ETF custody space, Long voiced her criticism of the Federal Reserve’s stance on digital assets, pointing out the inconsistency in its approach.
She further added that while the Fed warns of systematic risks posed by digital assets, it continues to allow top banking players to enter the space. “It’s how the U.S. system works,” she remarked.
BUT OF COURSE. While the Fed screams about the systemic risk of digital assets, it lets a *systemically important bank* get into the business. You literally can’t make this up. It’s how the US system works, folks. https://t.co/qFBfY3AKBI
— Caitlin Long (@CaitlinLong_) September 24, 2024
During the Gary Gensler hearing on Tuesday, SEC commissioner Hester Pierce also spoke about the preferential treatment from the securities regulator. She added that the agency is allowing certain entities to bypass the existing SAB 121 regulations that prevent regulated financial institutions from custody of Bitcoin and other cryptocurrencies. Last week, Congressman Ritchie Torres also accused the SEC of misusing SAB 121 to their benefit.
Coinbase to Face Competition in Crypto Custody
Amid the recent crackdown on crypto custody providers like Silvergate Bank, Coinbase emerged as one of the sole players offering crypto custodial services. This also led to questions of whether the SEC is centralizing crypto custody.
With players like BNY Mellon entering the scene, Coinbase will see some competition coming along its way. The US banking giant has been showing interest in the crypto industry since January 2023. Additionally, it already supports nearly 80% of the Bitcoin and Ether ETFs approved by the US SEC for its fund services business. Looking at this strong demand, it now seeks to capitalize on the crypto custody business.
Coinbase is one of the big custodians serving top clients like BlackRock for their crypto ETF. In his latest interview, BlackRock’s head of digital assets Robbie Mitchnick said that “nothing of significance has changed” at their end with custodial service providers. However, he added that they would continue to fine-tune as the industry evolves.
As crypto ETF custody comes into focus, BlackRock Head of Digital Assets Robbie Mitchnick says “nothing of significance has changed” https://t.co/iEWuW22snc pic.twitter.com/YBLG2zfrgc
— Bloomberg Crypto (@crypto) September 24, 2024
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