BNY Mellon in Talks with Kraken Parent Over Infrastructure Partnership Spanning Custody and Trading

The 240-year-old custodian bank is negotiating a broad infrastructure agreement with Payward that could reshape how institutional and retail investors access digital assets.

BNY Mellon, the oldest continually operating bank in the United States, is in advanced discussions with Kraken's parent company Payward over a sweeping infrastructure partnership that would span digital asset custody, trading, payments, and broader financial market infrastructure, according to sources familiar with the negotiations.

The potential agreement would mark one of the most significant bridges yet between traditional finance and cryptocurrency exchanges, uniting BNY's 240-year legacy as a custodian of $48 trillion in assets under custody with Kraken's position as the fourth-largest U.S. crypto exchange by volume. Unlike previous bank-crypto partnerships focused narrowly on custody or settlement, this deal would integrate infrastructure across multiple layers of the financial stack.

For ordinary investors, the partnership could eventually mean that crypto purchased on Kraken might be held in custody structures supervised by BNY Mellon, potentially qualifying for greater regulatory protection and institutional-grade insurance. It could also enable seamless movement of assets between traditional brokerage accounts and crypto wallets, dissolving the friction that currently forces users to wire money between banks and exchanges.

The talks come as Nasdaq recently invested $100 million in Payward at a $21 billion valuation, signaling that traditional financial infrastructure providers see crypto exchanges as essential partners rather than competitors. BNY has been building its digital asset capabilities since 2021, when it became the first major U.S. custodian bank to hold bitcoin and ether on behalf of institutional clients.

Kraken, which holds licenses in multiple U.S. states and operates globally, has been seeking deeper ties to regulated banking infrastructure as scrutiny of crypto firms intensifies. The exchange has avoided the compliance failures that plagued competitors like Binance and FTX, positioning it as a preferred partner for institutions wary of reputational risk.

The scope of the partnership could extend beyond custody to include joint development of tokenized securities platforms, cross-border payment rails using stablecoins, and potentially even co-branded financial products that blend traditional and digital assets. BNY has already launched tokenized money market funds and blockchain-based repo settlement systems, indicating its willingness to commit core banking functions to distributed ledger technology.

Neither BNY Mellon nor Payward has publicly commented on the talks, and any final agreement would require approval from U.S. banking regulators including the Office of the Comptroller of the Currency and the Federal Reserve. Previous attempts by banks to partner with crypto firms have faced delays and scrutiny, though the regulatory environment has warmed considerably since 2023.

Investors should watch whether the partnership includes revenue-sharing on trading fees, which would give BNY a direct stake in crypto market growth, or remains limited to infrastructure provision. The difference would signal whether Wall Street sees crypto as a permanent asset class or merely a client service to be tolerated.