In a significant development for Bitcoin (BTC), the broader crypto market and the traditional banking industry, BNY Mellon has been identified as the first bank to receive an exemption from the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121.

Unchained first reported the announcement during a Wyoming Select Committee on Blockchain, Financial Technology, and Digital Innovation public hearing earlier this week.

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BNY Mellon, America’s largest custodian bank, was highlighted during the testimony of Chris Land, general counsel for pro-Bitcoin US Senator Cynthia Lummis.

Land confirmed that the SEC has exempted BNY from requirements of SAB 121, which mandates that financial institutions that custody cryptocurrencies must record these digital assets on their balance sheets and create corresponding liabilities.

Land stated: “BNY is looking to get more involved in the crypto custody business,” signaling not only a significant shift in the bank’s strategy toward institutional digital asset management but also a sense of broader anticipation for Bitcoin’s adoption to expand the reach and offerings of these institutions to their clients.

Unchained also notes that the SEC’s exemption for BNY Mellon could pave the way for other financial institutions to explore similar opportunities. Still, the SEC’s SAB 121 requires custodians to account for Bitcoin or other crypto assets on their balance sheets, which has reportedly been challenging for many banks.

Nevertheless, the Securities and Exchange Commission’s chief accountant, Paul Munter, recently indicated that certain exceptions could apply under certain conditions that were not disclosed in the report.

Industry Giants Weigh In

BNY Mellon operates under the supervision of the New York Department of Financial Services (NYDFS) and the Federal Reserve, which plays a critical role in its compliance and operational framework.

Land emphasized that the Federal Reserve would have had to provide a non-objection to BNY’s entry into the digital asset custody sector, although the exact requirements remain somewhat ambiguous.

Chair Cyrus Western of Wyoming’s Select Committee raised concerns about whether BNY would need to obtain New York’s BitLicense, a regulatory requirement for cryptocurrency businesses operating in the state. Land suggested that BNY might argue that federal banking laws preempt state regulations like the BitLicense.

Per the report, the exemption granted to BNY has raised eyebrows among other crypto firms such as Custodia Bank and crypto exchange Kraken, who have expressed frustration over what they perceive as “regulatory favoritism.”

Western remarked that while companies like Custodia Bank have adhered to the rules and sought to operate transparently, they feel sidelined in favor of larger institutions like BNY.

On a more positive note, Michael Novogratz, CEO of Galaxy Digital, speculated that the SEC’s exemption could signal a shift encouraging more traditional banks to get involved in cryptocurrency.

This aligns with BNY Mellon’s Chief Executive Officer Robin Vince’s recent commentary about the bank’s preparations for a more active role in the digital asset space.