According to the Bank of New York Mellon, it is the largest trust bank in the world. Now it allows its customers to buy and hold cryptocurrencies as well – and is definitely looking at DeFi, staking and tokenized securities.
Yesterday, October 11, BNY Mellon announced that its Digital Asset Custody Platform had gone live in the US. Select customers can now “hold and transfer bitcoin and ether.” This “milestone” underscores the bank’s commitment to “meet the needs of customers who want a trusted service provider for both traditional and digital assets.”
Bitcoin and Ether are, the press release leaves no doubt about that, just the beginning. This is shown by a survey conducted by the major bank among 271 institutional investors from all over the world.
On the one hand, the survey shows a solid interest in cryptocurrencies. 41 percent already own some, and another 15 percent intend to add them to their portfolios over the next five years.
But institutional investors want far more than just holding cryptocurrencies. You want to use blockchains productively. 77 percent want to earn interest on crypto assets through staking pools. 88 percent are willing to use “digital representations of cash on a blockchain”, i.e. stablecoins. 91 percent are interested in investing in tokenized products, and a whopping 97 percent agree “that tokenization is revolutionizing asset management” and is “good for the industry.”
The institutional ones are opening up to Bitcoin, Ethereum and other cryptocurrencies. But what they are primarily looking for are tokenized assets. Bitcoin and other cryptocurrencies are more like the stairway leading to them.
With the platform, BNY Mellon could therefore play a dual role: On the one hand, it helps institutional investors and private investors who do not yet hold cryptocurrencies to buy and store them. On the other hand, it paves the way for far broader tokenization, of stocks, bonds and more, with a willingness to integrate it into staking and DeFi.
Little is known about the platform itself. The methods of storing cryptocurrencies with an extremely high degree of security have long been established: cold wallets, which never connect the private keys to the Internet, and multisig processes, in which a transaction is carried out by several people or by several people key must be signed.
The only thing the press release says about the platform is that the bank is “working closely with leading fintech companies.” The technical infrastructure is believed to have been entrusted to Fireblocks, a provider of software and services related to cryptocurrencies and digital assets, including the infrastructure that banks can use to store their digital assets themselves. Fireblocks creates security and flexibility by “combining the latest breakthroughs in multi-party computational cryptography with secret isolated hardware.”
The other mandated vendor is Chainalysis, which, unsurprisingly, helps meet “current and future regulatory requirements.”
BNY Mellon didn’t start work on the platform until 2021. The fact that a major bank can set up a technically mature, secure and regulatory solid platform within one to two years is more than just a detail. The technical and legal integration of cryptocurrencies and digital assets into banking is more or less complete. Banks now only have to access it.
With BNY Mellon, a heavyweight in international finance is leading the way. The New York financial institution is considered one of 30 banks in the world that are too big and systemically important to be allowed to fail. With $43 trillion in assets under management — assets of all kinds — in trust and $1.9 trillion under active management, BNY Mellon is the largest wealth manager among banks.
The time window in which small, up-and-coming banks can position themselves in a niche with cryptocurrencies is not closing. It is now officially closed.
