Founded by Alexander Hamilton, BNY Mellon, the oldest US Bank, is one of the first large financial institutions in the country to safeguard digital assets like cryptocurrency alongside traditional investments.
The country’s oldest bank said that it would start receiving cryptocurrencies on Tuesday and become the first US bank to safeguard digital assets. Earlier this fall, BNY Mellon received the approval of New York’s financial regulator to begin receiving bitcoin and ether from selected customers starting this week.
The BNY Mellon will store the keys required to transfer and access these digital assets and provide bookkeeping services on those digital currencies to help managers fund their portfolios of stocks, bonds, commodities, and other assets.
The move is an important milestone concerning the traditional banks in the United States and their growing acceptance of digital assets in the legitimate market and as a source of new business. At the same time, many Wall Street executives are still anxious about the potential of cryptocurrencies and advise people to tread cautiously until Washington does not clarify how the market will be regulated. Many financial firms have responded positively to the calls from a growing number of clients who hold digital assets to step into their traditional role as intermediaries.
Money managers have relied on BNY Mellon for a long time and other custody banks for an array of back-office functions, including tracking changes to the value of their assets. Founded more than two centuries ago by Alexander Hamilton, BNY Mellon remains the biggest custody bank in the world.
Until now, fund managers had to take custody of their digital assets with a crypto specialist. BNY Mellon, now the first of the eight systemically important banks in the US to store digital currencies, will allow customers to use just one custody platform for both their traditional and crypto holdings.
“We are excited to do our bit in driving the financial industry forward,” BNY Mellon’s president and chief executive, Robin Vince, said in a statement.
BNY Mellon unveiled the plans concerning digital assets in February 2021, wherein it said that the bank would hold and transfer cryptocurrencies on behalf of investment firms. It has since integrated its crypto/digital asset custody business into the core accounting platform. The bank is currently using software developed by Fireblocks that will help it store its digital holdings. Chainalysis software will also help BNY Mellon to analyze and track the assets and their path before they arrive at the bank.
The platform is slated to go live with select investment-fund firms this week. The bank also said that it hopes to expand the crypto custody offerings to more clients in the future following the pending regulatory approvals.
This year, a dramatic selloff in digital assets wiped out $2 trillion in value from the crypto market, reminding individual investors and institutions with deep pockets that the market is volatile. The downturn in the crypto market also caused the collapse of numerous prominent crypto firms. It renewed the calls to impose stricter investor protections on those firms that trade, store and lend digital assets.
Earlier this month, a panel of US officials also called for tougher oversight. The Financial Stability Oversight Council, which was chaired by Treasury Secretary Janet Yellen, implored Congress to consider legislation to plug the gaps in the already existing securities regulations. In August, Gary Gensler, Securities and Exchange Commission Chairman, said that the digital assets market is riddled with “abuse, fraud, and scams.”
According to the latest survey commissioned by BNY Mellon, many investment managers remain eager to invest in Digital assets. Nearly 41% of 271 institutional investors said they were holding cryptocurrencies. BNY Mellon further said that another 15% would likely hold Crypto assets in their portfolios in the next two to five years.
Leave a Reply