The oldest bank in the U.S., Bank of New York Mellon, said it will start later this year to integrate bitcoin and other digital currencies into the same financial network it uses for more traditional holdings such as U.S. Treasury bonds, equities and tech stocks.
The bank’s move toward treating digital currencies like any other asset is an endorsement of cryptocurrencies, which were once considered “a Wild West asset with little to no financial protection for its users.”
BNY said it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. Custody banks such as BNY keep track of money managers’ assets, whether they are real estate or cash kept in an account with another bank, storing some themselves while attesting to the existence of others, Wall Street Journal reported.
“Digital assets are becoming part of the mainstream,” said Roman Regelman, CEO of BNY Mellon’s asset-servicing and digital businesses.
The bank said it’s accelerating its capability to help clients’ evolving needs related to cryptocurrencies. It’s the first global bank to announce plans to provide an integrated service for digital assets, Regelman said in a press release.
Custody banks keep records on all of the managers’ trades, and figure out how the value of each of those assets has changed.
“The custodian’s job is to make sure it can account for and value funds at an aggregate level and shareholder level, and makes sure assets exist,” said Peter Cherecwich, president of asset-servicing at Northern Trust Corp. in a Wall Street Journal report. Being a custodian for digital assets means figuring out how to handle physical storage, Cherecwich said.
BNY Mellon isn’t the first big-name financial firm to offer service for digital assets but its announcement is the first time a big custody bank has unveiled guidlines for treating digital currencies like any other asset.
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“Enabling the use of digital assets is critical to transforming the future of custody,” said Caroline Butler, head of Custody at BNY Mellon, in a prepared statement. “Building the bridge between the traditional and digital spaces will create a front-to-back ecosystem for innovation. Our digital asset capabilities should help evolve the way the financial industry operates, including custody, collateral management, issuance (and) investment management.”
In the past, major custodian banks expressed concerns over potential regulatory or legal risks involved in banking the cryptocurrency market, CNBC reported. “But as prices of bitcoin and other digital assets have continued to rise, they have become more popular with asset managers, hedge funds and other institutional investors.”
Bitcoin was trading at $47,430.11 as of this writing, with an intraday high of $48,635.84 today, according to CoinDesk.
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