SAB 121 requires financial institutions holding cryptocurrency on behalf of clients to record these digital assets as liabilities on their balance sheets—guidance that has been heavily criticized for being overly burdensome. The SEC’s recent exemption, however, allows BNY Mellon to bypass some of these requirements, potentially enabling the bank to expand its institutional crypto custody services.
Land revealed that the SEC granted the exemption, paving the way for BNY Mellon to engage in institutional crypto custody, a significant move in the financial sector. “[BNY Mellon] had some problems with Staff Accounting Bulletin (SAB) 121, and the SEC has apparently given them some kind of variance from SAB 121 to move forward,” Land said during his testimony. He noted that BNY Mellon’s exemption sets a precedent, signaling the potential for other financial institutions to receive similar treatment.
The SEC had previously hinted at SAB 121 exemptions for banks and brokerages involved in digital asset custody, but BNY Mellon is the first to be publicly identified as having received the waiver. SEC Chief Accountant Paul Munter confirmed last week that the agency had issued exemptions under certain conditions, though he did not specify which entities were involved. This latest news underscores the growing regulatory clarity surrounding crypto custody, especially for institutions.
BNY Mellon, which operates under the regulatory supervision of the New York Department of Financial Services (NYDFS) and the Federal Reserve, declined to comment directly on the exemption. However, this move highlights the increasing involvement of traditional financial institutions in the Bitcoin space as they seek to meet the rising demand for secure and regulated digital asset custody solutions.
The SEC’s decision is seen as a potential catalyst for other banks and financial firms looking to enter the Bitcoin market. BNY Mellon’s exemption could lead to more widespread participation by traditional financial players, further legitimizing the integration of Bitcoin into the global financial system.
While the news was welcomed by many in the financial industry, it also sparked frustration among smaller players. Wyoming Select Committee Chair Cyrus Western expressed concerns that the exemption for BNY Mellon creates an uneven playing field, disadvantaging smaller companies that have adhered to strict regulatory guidelines. Western emphasized the challenges faced by crypto-focused firms like Custodia and Kraken, which have struggled to gain similar regulatory approvals.
