Cryptocurrency continues to make its way into mainstream markets as the nation’s oldest bank, the Bank of New York Mellon, begins to finance Bitcoin and other digital currencies.
BNY Mellon announced on Feb. 11 that it is creating a new enterprise Digital Assets unit to help the bank’s clients address evolving needs related to the growth of digital assets, including cryptocurrencies.
“BNY Mellon is proud to be the first global bank to announce plans to provide an integrated service for digital assets” said Roman Regelman, CEO of Asset Servicing and Head of Digital at BNY Mellon. “Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field. Pending further evaluations and approvals, we expect to begin offering these innovative and industry-shaping capabilities later this year.”
BNY Mellon is not the first big-name financial firm to announce its interest in digital assets and the crypto market. Fidelity Investments announced plans in October 2018 to store and trade crypto currencies. A year later, the company won regulatory approval to operate its crypto business in New York. However, BNY Mellon is the first big custody bank to unveil a pathway for treating digital currencies like any other asset.
The new unit will be “cross-functional” and comprised of a cross-business team led by Mike Demissie, head of Advanced Solutions at BNY Mellon. The unit is currently developing a client-facing prototype that will be the industry’s first multi-asset digital custody and administration platform for traditional and digital assets.
“The Digital Assets unit plans to deliver a secure infrastructure for transferring, safekeeping and issuing digital assets. Consistent with our open-architecture approach, the unit will leverage BNY Mellon’s digital expertise and leading technologies from fintechs and other collaborators to speed up product development and help our clients tap into the best available solutions in the market,” said Demissie.
The new platform will eventually allow digital currencies like Bitcoin to pass through the same financial network that is currently used for more traditional financial holdings such as U.S. Treasury bonds and equities.
The service is not yet available to bank customers because the service needs to first go through product analysis and approvals. Pending approval, BNY Mellon said that the new unit will offer its services to customers some time in 2021.
This development is a significant step for traditional banks and cryptocurrencies alike as traditional financial institutions have expressed concerns over regulatory, legal, and stability risks associated with cryptocurrencies that have left them reluctant to come into direct contact with crypto markets.
The announcement of the new service is well-timed as Bitcoin has had a strong start to 2021 following massive growth at the end of 2020. On Feb. 11, the cryptocurrency was up 7.7% to around $48,250. That is a record high price for the cryptocurrency and reflects the growing interest in the asset from firms like BNY Mellon and companies like Tesla.