US Bancorp Rejoins Bitcoin Custody with ETF Support After Regulator Clarity

US Bancorp has resumed bitcoin custody services for institutional clients, following new clarity from federal regulators on how banks can serve as qualified custodians for digital assets. The bank will now also provide custody for spot bitcoin ETFs, which the SEC approved last year. This move reflects institutional demand for secure handling of bitcoin funds managed by firms like BlackRock and Fidelity, which have drawn billions of dollars in inflows since approval. Custody services allow banks to securely store cryptographic keys for clients, a critical function for asset managers who must comply with fiduciary standards.

U.S. Bancorp has resumed its Bitcoin custody services for institutional clients following new regulatory clarity from federal authorities. The bank will now also provide custody services for spot Bitcoin ETFs, which the SEC approved last year. This move reflects growing institutional demand for secure handling of Bitcoin funds managed by firms like BlackRock and Fidelity, which have drawn billions of dollars in inflows since approval.

The bank's decision to re-enter the Bitcoin custody market comes after a three-year hiatus, during which prohibitive capital requirements imposed by the SEC had stifled the service. U.S. Bancorp will act as the primary, client-facing intermediary, while crypto firm NYDIG will serve as the sub-custodian, holding the actual digital assets. This hybrid model aims to provide institutional comfort in a volatile market [1].

U.S. Bancorp's Stephen Philipson, head of wealth, corporate, commercial, and institutional banking, stated that a "bank-owned provider that has that strength and stability and continuity gives clients a lot of comfort in an evolving part of the market" [2]. This strategic pivot is particularly timely as more capital flows into products tied directly to Bitcoin's spot price, and institutional managers seek reliable custodians for their regulated funds.

The resurgence in cryptocurrency interest from traditional financial institutions can be largely attributed to regulatory changes under the current U.S. administration. The repeal of the SEC's Staff Accounting Bulletin 121 (SAB 121) earlier this year, which had forced banks to hold capital against crypto held for clients, has paved the way for banks to re-enter the digital asset space [1].

Since their landmark approval in January 2024, spot Bitcoin ETFs have seen a staggering $54.57 billion in cumulative inflows, with their combined assets under management ballooning to $143.2 billion, meaning they now custody an estimated 6.45% of the entire circulating Bitcoin supply [1]. The explosive growth of these funds has placed immense pressure on the custody landscape, which has been heavily reliant on a very small number of crypto-native firms.

Notably, U.S. Bancorp is not alone in making this calculation. Citigroup is also actively exploring custody services for digital assets that back crypto-related investment products, signaling a broader trend of major financial institutions that are no longer just observing the digital asset space but are actively building the infrastructure to serve it [1].

References:
[1] https://crypto.news/u-s-bancorp-reenters-bitcoin-custody-market-in-post-sec-landscape/
[2] https://finance.yahoo.com/news/us-bancorp-revives-institutional-bitcoin-120523648.html