The Bank of New York or BNY Mellon is, right now, the largest holder of securities, commodities, and cash in the entire world, since it holds well over $46 trillion in assets under custody.
Since BNY Mellon has started to offer those very same custody services to crypto clients, the need to track those assets has also arisen. This is where Chainalysis steps in to handle the situation. The firm announced today that the bank shall be integrating its compliance software in order to aid with risk management. Chainalysis traces Blockchain transactions.
Among its arsenal of many tools, including but not limited to Know Your Transaction, a feature that sifts through data in order to determine whether withdrawals or deposits are “high risk.” For instance, should crypto funds be flowing to an address that is present on an international sanctions list, it can block the transaction. Another example would include if the funds were ill-gotten by way of a hack or a ransomware attack, the software then has the ability to freeze a deposit.
In a similar fashion, the Chainalysis Reactor software links addresses to real-life entities, converting gibberish into the kind of information financial institutions can in fact use.
Collaborating with BNY Mellon was one of the easier calls the tracking firm made. “Chainalysis has always believed that financial institutions are critical to the overall growth and success of the cryptocurrency industry,” said Jonathan Levin, Chainalysis co-founder and CSO, in a statement.
BNY Mellon’s first endeavor in the world of crypto arrived just a little over a year ago. That was when it announced it’d begin the storage and transfer of Bitcoin and other cryptocurrencies for the purposes of asset-management clients, the exact same way it was already holding fiat currencies and equities.
Last year in July, Grayscale Investments selected the custodian bank in order to run the accounting and administration of its Grayscale Bitcoin Trust. This was a product with a $4.5 billion market cap and allowed traditional investors to get exposure to BTC’s price, all without the need to touch the actual cryptocurrency. Grayscale’s plan now involves turning the product into an exchange-traded fund that’d see an expansion in its reach, via allowing “shares” in Bitcoin to be traded like stocks for instance and incorporated rather easily into investing portfolios. It’s important to note that right now the U.S. Securities and Exchange Commission has yet to approve of a Bitcoin ETF.
Despite the uneasy relationship some crypto enthusiasts have had with some services provided by Chainalysis, BNY Mellon is nothing if not dedicated to formalizing crypto custody measures, which could end up being a boon for this growing industry.