World’s Largest Custodian Bank Moving Into Crypto, Considering Issuing Cryptoassets

The oldest bank of the United States, Bank of New York Mellon (NYSE: BK), has revealed it will start financing bitcoin and other digital currencies through the rollout of a new cryptocurrency custody service.

According to CNBC, the bank will start allowing cryptocurrencies to pass through the same financial network it is currently using for traditional holdings like U.S. Treasury bonds and equities. The move comes after months of analysis of its prototype digital asset framework, and a blog post from 2019 shows BNY Mellon has been eyeing crypto custody for at least two years.

Roman Regelman, CEO of asset servicing and head of digital at BNY Mellon, said the financial institution is proud to be the “first global bank to announce plans to provide an integrated service for digital assets,” and added:

Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field.

The executive pointed out that, pending product analysis and approvals, the bank should start offering cryptocurrency services to customers this year. BK’s stock price has risen over 3% in premarket trading after the announcement was made.

Individual investors and businesses have over the last few months become more comfortable with the cryptocurrency world, after PayPal revealed it was launching a feature letting users buy, sell, and hold crypto on its platform. Since then publicly traded firms like MicroStrategy invested billions in the flagship cryptocurrency, with Tesla recently announcing a $1.5 billion investment.

BNY Mellon is the world’s largest custodian bank, with some $41 trillion in assets in its safekeeping. The move lends legitimacy to the cryptocurrency space and is believed to be tackling one of the major barriers stopping more institutional investors from entering the space.

Mike Demissie, head of advanced solutions at BNY Mellon, told CoinDesk the platform would service top cryptoassets, but those included will be “driven by client interest and demand,” as well as regulatory compliance.

Demissie revealed that the crypto custody solution isn’t being built from scratch, but is “not ready to disclose” any names of the outside partners the bank could be relying on for its service. BNY Mellon could be offering white-glove prime brokerage services in the space, and hinted it will adjust services depending on client demand.

Demissie added:

So that’s not just safekeeping of these assets, they want to leverage them for lending purposes, they want to leverage them for collateral. Then we are also looking at issuing digital assets, like tokenized securities, real assets.

Caroline Butler, head of custody at the bank, said the firm wants to provide a significant level of interoperability, allowing clients to borrow or lend BTC versus the dollar. Its custody solution is said to be a mix of cold storage, multi-party computation (MPC), and hardware security modules.

Featured image via Unsplash.

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