Odaily Planet Daily News According to American Banker, Bank of New York Mellon (BNY Mellon) has encountered regulatory obstacles in its entry into the digital asset custody business.

Specifically, US SEC Employee Accounting Bulletin No. 121 (SAB121) requires digital asset custodians to record relevant digital assets on their balance sheets. The regulatory requirement poses a potential hurdle for banks seeking to expand their digital asset custody business, especially those that specialize in fiduciary services such as BNY Mellon.
BNY Mellon will start digital asset custody business in October 2022. However, the regulatory hurdles involved in SAB121 were not discovered until after the bank had made significant progress in establishing a crypto custody business. BNY Mellon treats digital assets similarly to more traditional assets, which are not included in its balance sheet.
In an application filed with the New York State Department of Financial Services, the bank said it intends to support its digital asset custody product by complying with U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), under which the custodian holds Digital assets are not reported on the balance sheet, only the associated fiat currency balances need to be reported.
However, the U.S. SEC’s stance on the matter is already taking its toll on the banking industry and could deter other banks looking to expand into crypto custody, including JPMorgan and Goldman Sachs.
Lee Reiners, a lecturer at Duke University School of Law and the Center for Financial Economics, said the more important impact on banks will be leverage, as they need to hold capital in digital assets, which could influence their decision to offer cryptocurrency custody services.
At the heart of the debate is whether cryptoassets are fundamentally similar to traditional assets. John Sedunov, an associate professor of finance at the Villanova University School of Business, said that encrypted assets have higher technical and operational risks than traditional assets. For example, stolen or hacked cryptocurrencies can be irretrievably lost, unlike most traditional assets in custody. (Crypto Slate)
In October last year, it was reported that the Bank of New York Mellon (BNY Mellon) was approved by the New York financial regulator to receive Bitcoin and Ethereum from selected customers. BNY Mellon said it is the first of eight systemically important U.S. banks to store cryptocurrencies and allow clients to use the same custody platform for their traditional and encrypted assets. The bank expects to offer crypto custody services to more clients in the future, subject to regulatory approval.