BNY Mellon will begin to hold Bitcoin and Ethereum on behalf of its clients with software developed in conjunction with crypto-custody provider Fireblocks.
The service goes live today on the bank’s accounting platform for some investment firms, according to a report in The Wall Street Journal. This means that BNY Mellon will store clients’ private keys and provide accounting on the crypto assets in their wallets.
The bank will use Chainalysis’ compliance software, including KYT (Know Your Transaction), an investigative tool to perform due diligence and another to assess transaction volumes and counterparties.
BNY Mellon did not immediately respond to a request for comment from Decrypt. But CEO and Chairman Robin Vince said in a statement that the bank was “delighted to help drive the financial industry forward as we enter the next chapter in our innovation journey.”
This is the latest, and perhaps the biggest, advance in the US crypto market by the nation’s oldest bank.
BNY Mellon and crypto
In February 2021, BNY Mellon announced plans to eventually hold crypto on behalf of its clients. A month later, the bank launched a Bitcoin custodial service in Ireland, much to the dismay of Irish central bank officials.
In March, BNY Mellon became the custodian of the cash reserves that support Circle’s stablecoin, Coin in USD. And in February, the bank announced that it had started using compliance software Chainalysis, noting at the time that it was a precursor to a possible custodial service.
“Chainalysis has always believed that financial institutions are critical to the overall growth and success of the cryptocurrency industry,” Chainalysis co-founder and chief security officer Jonathan Levin said in a statement.
BNY Mellon currently has $43 trillion in assets under custody and another $2 trillion under management, according to its second quarter earnings report. Acting as a custodian, the core business of the business, usually involves providing less active dispatch or financial advice.
The bank formed its new digital asset unit last February, saying at the time that it would “accelerate the development of enterprise solutions to serve the rapidly evolving digital asset space.”
Back in April, Fireblocks CEO and co-founder Michael Shaulov discussed the challenges of developing a crypto custody solution on the BNY Mellon Perspectives podcast.
While SWIFT, an international financial services network, can take two or three days to settle a trade, giving analysts plenty of time to verify it, crypto trades settle in seconds or minutes. This means crypto custodians face two main issues, he said.
“One is really how do you secure that private key at rest, because that’s basically what makes sure that, you know, you go to bed with 100 Bitcoins in that wallet and you wake up with 100 Bitcoins still there,” Shaulov said on the podcast. “And the second issue, which I think a lot of people don’t really think about in this context, is that ultimately the hardest part is really making sure you transfer it to the right place.”
Tuesday’s news makes BNY Mellon one of many Wall Street stalwarts to report crypto news amid the bear market.
In August, BlackRock launched a private Bitcoin trust for its US-based institutional clients and announced a partnership with Coinbase Prime. Last month, Nasdaq said it was working on its own institutional crypto custodial service and Fidelity said it could offer Bitcoin to its retail investors.
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