BNY Mellon readies to launch crypto custody service this year

BNY Mellon is collaborating with digital asset infrastructure provider Fireblocks to launch an institutional-grade custody solution for cryptocurrencies later in 2022.

BNY Mellon

According to a report from City A.M., America’s oldest bank has set up a new unit dedicated to providing its clients with ‘an integrated service’ for digital assets, which would cover classic cryptocurrencies and could be extended to stablecoins. Upon launch, BNY customers will be able to store Bitcoin and Ether in its crypto wallets which are powered by Fireblocks technology.

Citing growing client demand, maturity of blockchain and better regulatory clarity, Katey Neate, the chief risk officer at BNY Mellon said “the idea is that we build a digital asset platform the cornerstone of which is custody that will enable the interoperability of traditional assets and digital.”

“I think regulatory clarity is improving, and people are feeling more confident because of that regulatory clarity. It’s still not the Nirvana that we’re looking for, but it’s at least easier to read the tea leaves now and understand what to look for when you’re developing a risk framework,” she added.

Talia Klein, the head of digital asset custody commercial products for BNY Mellon, also told the publication that the crypto service could be coming to Britain after an initial US launch.

“I think what we’re seeing in the UK is that there’s a really vibrant and active digital assets market here,” Klein said.

BNY Mellon was involved in OneCoin scam

Further, the custodian bank, which is sitting on $2 trillion in assets under management, states that even conservative clients are seeking exposure to digital assets. The new offering also targets native crypto firms, like Coinbase and other US exchanges, who are looking for BNY Mellon’s core investment services.

BNY Mellon is currently developing a prototype that will eventually allow cryptocurrencies to pass through the same financial network it currently uses for investments in traditional assets like bonds and stocks. The custody bank describes this system as “the first multi-asset digital custody and administration platform for both traditional and digital assets—bringing bitcoin and cryptocurrencies under the same roof as traditional holdings.”

BNY Mellon ventured into the crypto space earlier in 2019 when it partnered with Bakkt, which created the first federally regulated cryptocurrency marketplace, to offer geographically-distributed storage of private keys secured by the bank.

In essence, BNY Mellon’s traditional role as a custodian of assets enables Bakkt to meet federal regulations that require brokers, exchanges and others to store investors’ assets with institutions like Bank of New York.

Consequently, BNY and Bakkt have set up a crypto-custody service, under which the Wall Street bank’s history of safeguarding the assets of institutional clients is leveraged to store Bakkt’s digital assets.

Interestingly though, BNY Mellon was accused of playing a central role in the OneCoin cryptocurrency scam. FinCEN files showed the bank processed funds worth a total of $137 million for companies and people associated with the $4 billion Ponzi scheme.