Bitcoin News Today: Bank-Backed Stability Drives Crypto Custody Renaissance

US Bancorp has announced the resumption of its institutional bitcoin custody services after a multi-year pause, signaling renewed institutional interest in digital assets amid evolving regulatory conditions in the United States. The decision comes following the repeal of an earlier Securities and Exchange Commission (SEC) guidance that had made it impractical for banks to hold cryptocurrencies on behalf of clients. The Trump administration’s shift toward a more crypto-friendly regulatory environment has encouraged traditional financial institutions to re-enter the space, with several banks exploring a range of digital asset services.

The custody service, which is now available to institutional investment managers and, for the first time, to bitcoin exchange-traded funds (ETFs), is being offered in partnership with crypto firm NYDIG. NYDIG will act as the sub-custodian, responsible for the direct handling of the underlying assets, while US Bancorp will serve as the client-facing intermediary. This structure allows the bank to leverage its financial infrastructure and reputation while mitigating operational exposure to the volatile crypto market.

Stephen Philipson, head of wealth, corporate, commercial, and institutional banking at US Bancorp, emphasized the value of having a stable and regulated bank-backed custody solution in a rapidly evolving market. “Having 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,” he noted. This is a key point for institutions seeking to manage digital assets without the risks associated with less-regulated alternatives.

The regulatory landscape for crypto custody has changed significantly in recent months. In early 2022, the SEC issued an accounting bulletin that effectively deterred banks from providing custody services for cryptocurrencies due to capital-intensive requirements. However, with the change in administration, this guidance was rescinded, allowing banks to explore new opportunities in the space. This regulatory shift has not only benefited US Bancorp but also inspired broader industry interest, with firms like Citigroup reportedly considering similar services.

The growing popularity of spot bitcoin ETFs has further accelerated institutional adoption of custody solutions. Roughly a dozen asset managers have launched such products since the SEC approved them last January, with BlackRock’s iShares Bitcoin Trust emerging as the largest with over $80 billion in market capitalization. Crypto exchange Coinbase currently dominates the custody market for these products, reportedly serving as the custodian for over 80% of issuers.

The return of traditional financial institutions to the crypto custody space reflects a broader trend of regulatory normalization in the United States. As the country aims to solidify its position as a global crypto leader, institutions like US Bancorp are positioning themselves to meet the growing demand for secure and compliant custody solutions. This move is expected to bolster confidence among institutional investors and contribute to the broader adoption of bitcoin-based investment vehicles.

Source:

[1] US Bancorp revives institutional bitcoin custody service (https://finance.yahoo.com/news/us-bancorp-revives-institutional-bitcoin-120523648.html)

[2] US Bancorp to offer Bitcoin Custody Services Again as ... (https://finance.yahoo.com/news/us-bancorp-offer-bitcoin-custody-171201540.html)