BNY Mellon Launches Bitcoin and Ethereum Custody Services

BNY Mellon – the oldest bank in the United States – just became the first to begin offering crypto custody services for its clients. 

The custodian will now protect users’ cryptocurrencies alongside their traditional investments on its platform. 

A Bank Adopts Bitcoin

According to the Wall Street Journal, the bank partnered with the established crypto custodian Fireblocks to offer the service. The latter serves institutional clients and has hired former SEC chairman Jay Clayton as an advisor.

The service is available starting Tuesday, but only to select investment firms. They may deposit their Bitcoin and Ether holdings with the bank, where it will store the private keys necessary to access their assets.

The firm also tapped Chainalysis to meet some of its compliance needs – a blockchain intelligence firm that provides on-chain surveillance of illicit activity. In this case, the bank will use the firm’s tools to evaluate transaction volumes and counterparties. 

One of the unique primary benefits of crypto is that it allows users to send money digitally while maintaining control of their money. That said, some still prefer to use custodial services for personal safety, or added benefits that non-custodial wallets can’t provide. For instance, the custodial Bitcoin wallet Strike lets users seamlessly receive a dollar-denominated paycheck in Bitcoin. 

That said, custody providers come with the same counterparty risk of confiscation/bankruptcy as the traditional banking system. Adding to that risk is that the crypto sector isn’t as tightly regulated yet, making use of such services by institutions less attractive. 

“That an esteemed custodial bank has entered the digital asset market offers significant options and removes many custodial risks for crypto clients,” tweeted Chanalysis on the partnership. “We’re proud to have collaborated with BNY Mellon to help drive efficiency and security for their Digital Asset Custody platform.

Custodia Bank Still Waiting

Caitlin Long – CEO and Founder of the Bitcoin bank Custodia – thought that BNY’s approval signaled a double standard in how regulators treat TradFi and crypto companies. 

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Her company sued the Federal Reserve in June for spending 19 months delaying its decision on Custodia’s application for a master account. Such an account would give Custodia direct access to the central bank, rather than needing to operate through an intermediary. 

“You will see a filing from my company in that lawsuit pertaining to the announcement this morning,” she said at DC Fintech Week on Tuesday, referring to BNY Mellon’s adoption of crypto. “We’ve been waiting for two and a half years to do that.”

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