Gensler suggests that BNY Mellon’s crypto custody model could extend beyond Bitcoin and Ether ETFs

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In comments on Bloomberg today, SEC Chairman Gary Gensler discussed BNY Mellon’s crypto custody structure. He suggested that the model used for the Bitcoin and Ether ETFs could be applied to other digital assets.

While the current approval only applies to Bitcoin and Ether ETFs, Gensler noted that the custody structure is not limited to specific crypto assets.

“Although the actual consultation was about two crypto assets, the structure itself was not dependent on what it is crypto, it didn’t matter what crypto it was.” Gensler said.

BNY Mellon now has the flexibility to extend its custody services to other digital assets if it chooses. Gensler pointed out that the “non-objection” is based on the structure itself, not the type of crypto asset, allowing other banks to adopt the same model for crypto custody.

Approval depends on BNY’s use of individual crypto wallets, ensuring that customer assets are protected and segregated from the bank’s own assets in the event of insolvency. This wallet structure was developed in consultation with the SEC’s Office of the Chief Accountant, leading to the agency’s “no objection” decision.

This approval guarantees that the bank’s approach complies with regulatory requirements, preventing client assets from being put at risk during bankruptcy, a key issue that has plagued crypto platforms such as Celsius, FTX and Voyager.

The crypto custody market, estimated at $300 million and growing at 30% annually, represents a lucrative opportunity for financial institutions. With non-bank providers typically charging much higher fees for custody of digital assets compared to traditional assets, banks like BNY Mellon are well positioned to capitalize on this growing demand by offering safer and more regulated solutions.

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