U.S. Bancorp is set to relaunch its bitcoin custody service after a hiatus of over three years, spurred by a renewed favorable stance towards cryptocurrencies from the Trump administration. The bank’s bitcoin custody program, initially introduced in 2021, is specifically designed for institutional investment managers managing both registered and private funds, alongside the nascent bitcoin exchange-traded funds (ETFs).
As part of the custody arrangement, U.S. Bank has partnered with the crypto firm NYDIG, which will function as the sub-custodian. This means that while NYDIG will handle the custody of the actual bitcoins, U.S. Bank will be the intermediary interfacing with clients. Stephen Philipson, U.S. Bank’s head of wealth, corporate, commercial, and institutional banking, emphasized that having a bank-owned provider brings a level of strength, stability, and continuity that can reassure clients navigating this evolving market.
The bitcoin custody service plays a crucial role in safeguarding bitcoin assets on behalf of clients, particularly in a regulatory landscape that has seen significant changes. U.S. Bank had previously shelved its bitcoin custody offerings after the U.S. Securities and Exchange Commission (SEC) issued an accounting bulletin in early 2022, which rendered it too capital-intensive for banks to hold digital assets like bitcoin for clients. However, this guidance was reversed earlier this year.
The lifting of these restrictions has prompted many banks to explore cryptocurrency services further. Citigroup, for example, is also considering offering custody services for digital assets that support crypto-related investment products.
The growing interest in custody services is largely driven by the surge in popularity of spot bitcoin ETFs, especially in light of bitcoin’s recent price increase. Since the SEC authorized spot bitcoin ETFs in January, around a dozen asset managers have launched these products, with BlackRock’s iShares Bitcoin Trust emerging as the largest, boasting a market capitalization exceeding $80 billion.
Currently, Coinbase dominates the custody sector for spot bitcoin ETFs, claiming to serve over 80% of issuers in this space. With traditional financial institutions like U.S. Bank reentering the cryptocurrency market, the landscape of custodial services for digital assets appears to be rapidly evolving, potentially reshaping the future of institutional investment in cryptocurrencies.
