BNY Mellon invests in startup, furthering push into crypto custody

As the clamor for cryptocurrencies increases, BNY Mellon is making a strategic investment in a startup that custodies digital assets for institutions.

The investment is part of the company’s broader plan to roll out digital asset custody by the end of this year, in a sector where competitors have experienced significant demand in recent months.

Fireblocks, the crypto custody startup, raised $133 million in its funding round, which included BNY Mellon and the hedge fund Coatue Management, among others. The financing deal was originally reported by the Wall Street Journal.

A BNY Mellon spokeswoman declined to disclose the size of its investment.

While financial advisors may have limited access to offer digital currencies for their own clients, crypto custody is an ever-growing sector for financial services institutions. Demand for digital currency is on the rise across channels.

Fidelity, Northern Trust and State Street all offer their own crypto services. Goldman Sachs decided to restart its trading desk for cryptocurrency, according to a Bloomberg News report.

Fidelity, which launched its subsidiary, Fidelity Digital Assets, in 2018, has attracted more than 100 firms to the platform, according to its head of product, Terrence Dempsey, who spoke with Financial Planning earlier this month.

“The uptick in which we've seen the pace of institutional investors coming into the space, especially over the last 12 months, has been nothing short of surprising,” he said.

Christopher Lee/Bloomberg

Approximately 24% of financial advisors own crypto in their personal portfolios, according to research from the cryptocurrency index and beta fund provider Bitwise. Morgan Stanley announced its intentions earlier this week to give wealthy clients access to Bitcoin funds.

BNY Mellon said last month that it would open a Digital Assets unit. Around that time, the bank said it would likely rely on crypto tech companies as it developed its own custody offering. “We are certainly not building it entirely from scratch,” Mike Demissie, head of advanced solutions at BNY Mellon, told Coindesk in February.

The global bank’s unit will deliver secure infrastructure for transferring, safekeeping and issuing digital assets, the company said in February. It also plans to use underlying crypto technology, such as blockchain, to improve its custody and investment offerings.