By Justin Baer
Bank of New York Mellon, the nation’s oldest bank, is making the leap into the market for cryptocurrencies.
The custody bank /zigman2/quotes/200171276/composite BK +1.61% said Thursday it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. In time, BNY Mellon will allow those digital assets to pass through the same plumbing used by managers’ other, more traditional holdings—from U.S. Treasurys to technology stocks—using a platform that is now in prototype. The bank is already discussing plans with clients to bring their digital currencies into the fold.
“Digital assets are becoming part of the mainstream,” said Roman Regelman, chief executive of BNY Mellon’s asset-servicing and digital businesses.
It’s a big step for Wall Street’s back-office banks, whose concerns over regulatory, legal and stability risks left them reluctant to come into direct contact with crypto markets. But as prices of bitcoin and other digital assets have continued to rise, they have become more popular with asset managers, hedge funds and other institutional investors.
BNY Mellon isn’t the first big-name financial firm to declare its interest in digital assets. Fidelity Investments announced plans in October 2018 to store and trade bitcoin and ether, another digital currency, and a year later won regulatory approval to operate its crypto business in New York.
But BNY Mellon’s announcement marks the first time one of the big custody banks has unveiled a road map for treating digital currencies as any other asset. And the bank hasn’t put limits on the kinds of digital assets it will allow clients to store there. BNY Mellon intends to begin offering these capabilities later this year.
In January, the Office of the Comptroller of the Currency issued guidance saying banks could use blockchain networks and other so-called stablecoins to perform certain functions. Stablecoins are currencies backed by fiat currencies and other traditional assets. In its letter, the OCC said they could be used to facilitate payments.