US Bancorp announced Tuesday it will resume offering Bitcoin custody services to institutional clients after suspending the program for more than three years due to restrictive federal regulations. The Minneapolis-based bank's decision follows the Trump administration's repeal of Securities and Exchange Commission guidance that had made cryptocurrency custody services prohibitively expensive for traditional financial institutions.
What to Know:
- US Bancorp partnered with cryptocurrency firm NYDIG to provide Bitcoin custody services primarily targeting institutional investment managers and Bitcoin exchange-traded fund providers
- The bank originally launched Bitcoin custody in 2021 but suspended operations after SEC accounting guidance made crypto storage too capital-intensive for banks
- The revival comes as spot Bitcoin ETFs have gained massive popularity, with BlackRock's Bitcoin fund alone holding over $80 billion in market capitalization
Banks Return to Crypto Custody Market
The bank's renewed Bitcoin custody program will serve institutional investment managers with registered or private funds, marking the first time the service will also accommodate Bitcoin exchange-traded fund providers. NYDIG will function as the sub-custodian, handling the underlying asset storage while US Bank manages client relationships and serves as the primary interface.
"Having a bank-owned provider that has that strength and stability and continuity, I think, gives clients a lot of comfort in an evolving part of the market," said Stephen Philipson, head of wealth, corporate, commercial, and institutional banking at US Bank. The partnership structure allows the bank to offer custody services without directly holding the digital assets on its balance sheet.
Bitcoin custody involves financial institutions safeguarding Bitcoin holdings on behalf of clients, similar to traditional asset custody services. The arrangement provides institutional investors with regulatory compliance and security assurances typically associated with established banking relationships.
US Bank originally launched its Bitcoin custody offerings in 2021 during the initial cryptocurrency boom. However, the program was discontinued after the SEC issued accounting bulletin guidance in early 2022 that required banks to hold crypto assets as liabilities on their balance sheets, making the service economically unfeasible.
The regulatory landscape shifted significantly after President Trump took office in January. The new administration repealed the problematic SEC guidance, removing the capital requirements that had driven banks away from cryptocurrency services.
Growing ETF Market Attracts Traditional Banks
Several major financial institutions have signaled renewed interest in cryptocurrency services following the regulatory changes. Citigroup executives told Reuters last month the bank is exploring custody services for digital assets backing crypto-related investment products, indicating broader industry movement toward cryptocurrency offerings.
The timing coincides with explosive growth in spot Bitcoin ETFs, which have emerged as a primary driver of institutional cryptocurrency adoption. Since the SEC authorized spot Bitcoin ETFs in January 2024, approximately twelve asset management firms have launched products tracking Bitcoin's price directly.
BlackRock's iShares Bitcoin Trust represents the largest such fund, with market capitalization exceeding $80 billion. The fund's success demonstrates institutional appetite for Bitcoin exposure through traditional investment vehicles rather than direct cryptocurrency ownership.
Banks view ETF providers as attractive custody clients due to the products' regulatory structure and growing asset bases. Unlike direct cryptocurrency ownership, ETF-backed Bitcoin holdings operate within established securities frameworks familiar to traditional financial institutions.
Currently, cryptocurrency exchange Coinbase dominates the custody market for spot Bitcoin ETFs. The company previously stated it serves as custodian for more than 80 percent of crypto ETF issuers, highlighting the concentration within the specialized custody sector.
Understanding Cryptocurrency Custody and ETF Structures
Cryptocurrency custody differs from traditional asset custody due to the digital nature of the underlying assets. Bitcoin exists as cryptographic keys rather than physical certificates, requiring specialized security infrastructure to prevent loss or theft. Professional custody services provide institutional-grade security measures including multi-signature wallets, offline storage systems, and comprehensive insurance coverage.
Exchange-traded funds tracking Bitcoin operate by holding actual Bitcoin rather than derivatives or futures contracts. The ETF structure allows investors to gain Bitcoin exposure through traditional brokerage accounts without directly managing cryptocurrency wallets or private keys.
Sub-custodian arrangements, like the US Bank-NYDIG partnership, separate client relationship management from technical asset storage. This structure allows traditional banks to offer cryptocurrency services while leveraging specialized firms' technical expertise and existing infrastructure.
Market Outlook
The renewed interest from traditional financial institutions signals potential mainstream adoption of cryptocurrency custody services. Banks' entry into the market could provide additional competition to existing cryptocurrency-focused custody providers while offering clients familiar regulatory frameworks and established banking relationships.
US Bank's return to Bitcoin custody reflects broader industry confidence in the current regulatory environment and growing institutional demand for cryptocurrency services.