Gairika Mitra
Bank of New York Mellon (BNY Mellon) has reportedly secured an exemption from adhering to the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121 accounting guidelines.
According to a testimony at a Wyoming public hearing by Chris Land, general counsel for U.S. Senator Cynthia Lummis, this move paves the way for BNY Mellon, the largest U.S. custodian bank, to provide crypto custody services to institutional clients.
Chris Land revealed that BNY Mellon is looking to expand its involvement in the crypto custody business. “They had some problems with SAB 121, and the SEC has apparently given them some kind of variance from SAB 121 to move forward,” Land stated during his testimony.
About SAB 121
SAB 121 is a critical regulation that mandates crypto custody firms to protect the digital assets held for their platform users. Implemented in 2022, this rule requires these firms to record a liability on their balance sheets representing their obligation to safeguard these assets. Additionally, SAB 121 necessitates recognizing an asset and a safeguarding liability at fair value for each reporting period.
The rule sparked concerns about the SEC’s scope and application, with some Congress members considering disapproving it. However, BNY Mellon, regulated by both the Federal Reserve and New York’s Department of Financial Services, appears to have found a path forward without any objections from these regulatory bodies regarding its plans for digital asset custody.
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Potential Impact on Institutional Crypto Adoption
Michael Saylor, a prominent advocate for Bitcoin, endorsed the news on social media, highlighting that credible rumors are emerging about major U.S. banks soon gaining the ability to custody Bitcoin.
This development might indicate a softening of the federal crackdown on crypto, which industry supporters have criticized as “Operation Choke Point 2.0,” an effort to exclude cryptocurrencies from traditional financial systems.
Credible rumors are circulating that one or more major banks in the US will soon be able to custody #Bitcoin. https://t.co/Zq9UzjoUjk
Related: Senators Introduce SAFE Crypto Act to Combat $9.3B Crypto Scam Surge
— Michael Saylor⚡️ (@saylor) September 20, 2024
Congressional Opposition to SAB 121
U.S. Representative Ritchie Torres has been a vocal critic of the SEC’s SAB 121 policy, saying that it contradicts generally accepted accounting principles (GAAP). He accused the SEC of stifling innovation by discouraging companies from exploring blockchain technology. “There is something profoundly un-American about banning innovation,” Torres remarked.
BNY Mellon’s exemption from SAB 121 guidelines marks a significant milestone in the crypto industry, potentially opening doors for broader institutional adoption and signaling a shift in regulatory stance.
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GAIRIKA
Gairika is a cryptocurrency journalist with a focus on Bitcoin and blockchain technology.
