Bank of New York Mellon, the nation's oldest bank, said Thursday it would hold, transfer, and issue bitcoin and other cryptocurrencies for institutional customers (i.e., asset-management clients). BNY Mellon is a custody bank. It holds funds for a variety of institutional clients. Now those clients will be able to store their cryptocurrencies with the bank.
Currently, money managers have to use a separate custodian for cryptocurrency holdings. Given that many of their traditional assets are stored with BNY Mellon, it only makes sense that they will start storing their digital assets with the bank as well.
“Digital assets are becoming part of the mainstream,” Roman Regelman, chief executive of BNY Mellon’s asset-servicing and digital businesses, told WSJ.
BNY Mellon wants to bridge the gap between traditional and digital assets, creating a seamless experience for its clients. How exactly client cryptocurrencies will be stored isn't yet known. But it is likely to be physical storage, which means off-line or cold storage.
Banks have been slow to embrace cryptocurrencies. That isn't because they haven't wanted to do it. It's mainly a function of a heavily regulated industry. With concerns over regulatory, legal, and stability risks, banks were left with too many unanswered questions.
So what changed? In January of this year, the Office of the Comptroller of the Currency (OCC) provided guidance for banks’ use of blockchain technologies. Although the OCC's guidance was mainly around stablecoins backed by fiat currency and less volatile than Bitcoin, it laid the groundwork for banks to move ahead with other cryptocurrencies processing payments.
MasterCard has also jumped onto the cryptocurrency payments bandwagon, announcing it will settle cryptocurrency payments directly on its network. 2021 is the year that institutions are finally embracing cryptocurrencies with more than just roadmaps. They are now executing on those roadmaps. The next big hurdle will be to get merchants on board as well.