BNY Mellon and other large custodial banks are interested in crypto custody but are hindered by US SEC rule SAB 121, which establishes accounting standards
Context & Ripple Effects
Institutional crypto-market design has increasingly sought the familiar separation of trading, brokerage, and asset safekeeping found in traditional finance, as described in the push for separate custody and trading roles. Customer pressure for independent asset custody also shows why large regulated custodians matter to market participants.
This report identifies accounting treatment—not a lack of bank interest—as the immediate constraint on that transition. It therefore makes custody policy a practical gatekeeper for institutional participation.
First-order effects
- BNY Mellon and similarly positioned custodial banks face a constraint on launching or expanding crypto-custody offerings while SAB 121 applies.
- Institutional clients seeking bank-based safekeeping have fewer incumbent-bank options available in the near term.
Second-order effects
- Specialist crypto custodians and platforms offering independent custody retain an advantage while banks' entry is constrained.
- Firms building institutional crypto trading workflows must continue to accommodate custody arrangements outside the traditional bank-custodian model.
Third-order effects
- If accounting rules continue to deter bank custody, crypto market infrastructure is likely to remain split between regulated banking channels and specialist digital-asset providers.
- The episode underscores that institutional adoption depends not only on demand or product capability, but also on whether regulatory treatment makes custody economically viable for banks.
The trend: Crypto custody is becoming a contest over whether regulation lets established financial infrastructure absorb digital assets or leaves the function with specialist providers.