The Bank of New York Mellon (BNY) is moving towards providing custody services for Bitcoin and Ether for its ETF clients after the United States Securities and Exchange Commission (SEC) allowed it to bypass controversial crypto accounting guidelines.
SEC Decision
Earlier this year, the SEC’s Office of the Chief Accountant conducted a review and concluded that the bank did not need to adhere to the SEC’s Staff Accounting Bulletin (SAB) 121. This bulletin requires companies safeguarding client crypto assets to list them as liabilities on their balance sheet.
Issues with SAB 121
SAB 121 has been a thorn in the side of the US crypto industry since its introduction in April 2022. After being incorporated into Coinbase’s Q1 2022 financial report, it led to false speculation that the company was insolvent. Politicians have also repeatedly criticized the guidelines, calling them “regulation disguised as staff guidance.”
Industry and Government Reaction
In October 2023, the Government Accountability Office determined that SAB 121 is subject to the Congressional Review Act, requiring agency rules to be submitted to Congress with a procedure for disapproval. Despite industry pressure and even legislation aimed at overturning SAB 121, President Joe Biden vetoed the legislation in June. Meanwhile, BNY Mellon continues to engage its banking regulators to offer custody services to its crypto ETF clients.
The SEC's decision to allow BNY Mellon to proceed on its terms may be a significant step toward broader acceptance of cryptocurrencies in the financial sector, yet numerous unresolved issues and controversies remain.
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