BNY Mellon’s Digital Custody Push

Analysts say the move by America’s oldest bank is further acknowledgment of the role of cryptocurrencies in global financial markets.

BNY Mellon is set to offer custody services for bitcoin and ether cryptocurrencies in response to rising demand from institutional clients, the world’s largest custodian bank said in an October press statement. In an industry first, the bank went live with its Digital Asset Custody Platform in the US last month allowing select clients to hold and transfer both bitcoin and ether.

According to BNY Mellon, a recent survey found 91% of institutional investors are interested in investing in tokenized products. Meanwhile 41% of institutional investors currently hold cryptocurrency in their portfolio and an additional 15% is planning to include digital assets in their portfo-lios within the next two to five years, the bank said.

Analysts say the move by America’s oldest bank is further acknowledgment of the role of cryptocurrencies in global financial markets, where regulatory uncertainty over the treatment of digital assets have acted as a brake. With the launch of its digital asset platform BNY Mellon is leveraging its 238-year history to reassure clients previously deterred by the “Wild West” issues associated with cryptocurrencies they add.

“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, BNY Mellon CEO and president.

For tech, the bank collaborated with Fireblocks, a firm that provides end-to-end protection of digital assets in transit and Chainalysis, a blockchain data platform, to address security and compliance demands. Last year BNY Mellon formed a Digital Assets Unit to develop solutions for the digital custody market.

The market for custody of digital assets is booming, but traditional banks struggled to marry technological requirements and decentralization of digital assets with the longstanding tendency of con-ventional custodian banks to centrally co-locate assets. Whether to maintain full control, partner with a technology provider to build a custody solution or take a hybrid approach are question conventional custodians have to address.

Still, new revenue opportunities in digital custody in areas such as staking, lending, prime brokerage and accounting could make the previously staid custody sector one of the few growth areas in banking.