2 years ago
The Bank of New York Mellon’s (BNY Mellon) foray into the integer plus custody concern has deed a regulatory hurdle, per American Banker.
It emerged that the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121) requires custodians of integer assets to grounds those assets connected their equilibrium sheets. This regulatory request presents a imaginable impediment for banks looking to standard their integer plus custody business, peculiarly those specializing successful spot services similar BNY Mellon.
BNY Mellon embarked connected its integer plus custody task successful October 2022. However, the SAB 121 regulatory roadblock was not identified until aft the slope had made important strides toward establishing its crypto custody business.
BNY Mellon’s attack was treating integer assets likewise to much accepted ones, which are not recorded connected its equilibrium sheet.
In its exertion to the New York State Department of Financial Services, the slope stated an volition to enactment its Digital Assets Custody merchandise by adhering to U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), nether which integer assets held by a custodian are not reported connected the equilibrium expanse with lone associated fiat currency balances needing reporting.
However, the SEC’s presumption connected the substance has sent ripples crossed the banking industry, perchance deterring different banks wishing to grow into crypto custody, including JPMorgan and Goldman Sachs, who person an involvement successful cryptocurrency developments.
According to Lee Reiners, a Duke Law and the Duke Financial Economics Center lecturer, the much important interaction for banks would beryllium the leverage ratio, arsenic they would request to clasp superior against integer assets. This could power their decisions connected providing crypto custody services.
The bosom of the contention lies successful whether crypto assets are fundamentally akin to accepted ones.
John Sedunov, an subordinate prof of concern astatine Villanova University successful the School of Business, said crypto assets contiguous higher technological, operational risks than accepted assets. For instance, a stolen oregon hacked cryptocurrency could beryllium irretrievably lost, dissimilar astir accepted assets successful custody.
Therefore, portion crypto and accepted assets whitethorn not airs the aforesaid risks, a valid statement exists for treating them differently.
The station BNY Mellon’s crypto custody task runs afoul of SEC rules appeared archetypal connected CryptoSlate.
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