The Bank of New York Mellon (BNY) is making progress in offering custody services for Bitcoin and Ether held by its exchange-traded fund (ETF) clients. This comes after the United States Securities and Exchange Commission (SEC) granted the bank an exemption from following controversial crypto accounting guidelines.
Earlier this year, the SEC’s Office of the Chief Accountant conducted a review and determined that BNY did not need to comply with the SEC’s Staff Accounting Bulletin (SAB) 121, as reported by Bloomberg.
SAB 121 requires companies that hold client crypto assets to list them as liabilities in their accounting. Since its introduction in April 2022, it has been a contentious issue within the US crypto industry.
The SEC has indicated that other financial institutions may also receive a similar exemption. In a statement to Bloomberg, an SEC spokesman said, “As long as their customers receive the same protection for the safeguarding of crypto assets as they do in custody arrangements, their balance sheet treatment is also the same as custody arrangements.”
Before BNY can begin offering custody services, it must obtain authorization from other regulators in addition to the SEC, according to statements made to Bloomberg by the bank.
SAB 121 has been a source of ongoing controversy. It took the world by surprise, and false speculation arose about Coinbase’s financial health after the company incorporated the new accounting rules in its Q1 2022 financial report.
In June 2022, politicians entered the debate by writing to SEC Chair Gary Gensler, expressing concerns about “regulation disguised as staff guidance.” At the urging of pro-crypto Senator Cynthia, the Government Accountability Office examined the guidance and determined in October 2023 that SAB 121 falls under the Congressional Review Act. This act requires agency rules to be submitted to Congress, along with a procedure for disapproval.
In February, a coalition consisting of the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association sent a letter to Gensler, requesting an exemption for traditional assets recorded on blockchain from the requirements of SAB 121.
Despite pressure to revise the guidance, the SEC maintained its position, and in May, legislation was passed to overturn it. However, US President Joe Biden vetoed the legislation the following month.
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