What Does BNY Mellon Holding Crypto Signal To Mainstreet and Reuglators

BNY Mellon's survey conducted earlier in this year highlighted that 41% of institutional investors were holding cryptocurrencies. Additionally, 15% said they likely would hold cryptocurrencies in the next two to five years. 

Based on these findings, BNY Mellon has announced that it has now launched a custody platform in the U.S, with a limited set of users. The users can hold and transfer Bitcoin and Ether, along with traditional financial services. BNY has also gotten approved from New York's financial regulators to provide these services.

Read here: What is the difference between custodial vs non-custodial wallets?

"Touching more than 20% of the world's investable assets, BNY Mellon has the scale to reimagine financial markets through blockchain technology and digital assets," said Robin Vince, Chief Executive Officer and President at BNY Mellon. "We are excited to help drive the financial industry forward as we begin the next chapter in our innovation journey."

"With Digital Asset Custody, we continue our journey of trust and innovation into the evolving digital assets space, while embracing leading technology and collaborating with fintechs," said Roman Regelman, CEO of Securities Services & Digital at BNY Mellon.

How will BNY Mellon Make this Happen?

As America's oldest bank, BNY Mellon has a 238-year legacy of trust, resilience, and innovation. BNY Mellon formed an enterprise Digital Assets Unit in 2021 to develop solutions for digital asset technology, with plans to launch the industry's first multi-asset platform that bridges digital and traditional asset custody.

BNY Mellon plans to use the software it developed with Firebloacks to store digital assets. Additionally, Chainalysis’s software will help the bank analyze and track the path the assets take before they arrive at the bank. The bank will store the keys required to access and transfer those assets, and provide the same bookkeeping services on those digital currencies that it offers to fund managers for their portfolios of stocks, bonds, commodities, and other assets.

"As the world's largest custodian, BNY Mellon is the natural provider to create a safe and secure Digital Asset Custody Platform for institutional clients," said Caroline Butler, CEO of Custody Services at BNY Mellon. "We will continue to innovate, embrace new technology and work closely with clients to address their evolving needs."

What About Regulations Beyond New-York's financial Regulators?

BNY announcement comes on the heal of nine recommendations, that the Financial Stability Board (FSB) - an entity that coordinates financial rulemaking among Group of 20 Economies (G20). The proposals seek cross-border consistency to regulating crypto-assets, particularly as the European Union finalizes groundbreaking rules to regulate the sector from 2024.

The underlying principle is that the same activity should be regulated in the same way, whether undertaken by a crypto asset company, bank or payments provider, and that crypto firms may need to separate some functions to ensure this, the FSB said. Additionally, Crypto asset companies should set aside capital like banks when undertaking similar activities as the asset class has lost $2 trillion in value, bringing it down to $935 billion versus $3 trillion.

The FSB also reviewed its guidance on regulating stablecoins, a type of cryptocurrency usually backed by a currency like the dollar or assets. This was mainly triggered by the crash of the dollar-backed Terra stablecoin in May highlighted the high risk of loss and potential fragility of stablecoins that lack a stabilization mechanism

The proposals have been put out to public consultation until Dec. 15, before being finalized by mid-2023, when FSB members would be expected to fast-track their implementation.

What does this mean for Consumers?

Gallup reports that 64% of U.S. adults think it is likely that the U.S. will become a cashless society in their lifetimes. If that were to happen, 45% of people say they would be upset, 9% would be happy, and the rest are indifferent.

The largest increase in the share of people who don’t make any purchases with cash is among the highest earners. For people with household income of $100,000 or more, 59% use no cash in the typical week, an increase from 36% in 2015, according to Pew.

Traditional institutions will continue to offer service related to digital / crypto assets. Whilst the value continues to have its peaks and valleys, the desire by consumers persists to hold alternative assets. Regulators and traditional firms will therefore continue to define and implement regulations that protect both consumers and business - this is a further sign of maturity.