United States Bancorp Resumes Cryptocurrency Custody Services After Regulatory Approval

United States Bancorp (USB) has resumed its cryptocurrency custody services for institutional investment managers, following regulatory approval. This move marks a significant step for the bank, which had previously suspended its cryptocurrency services due to regulatory uncertainties. The resumption of these services indicates a growing acceptance of cryptocurrencies within the traditional financial sector, as well as a more favorable regulatory environment for digital assets.

The decision by United States Bancorp to re-enter the cryptocurrency custody market comes at a time when institutional interest in digital assets continues to rise. Institutional investors, including hedge funds, pension funds, and family offices, are increasingly looking to diversify their portfolios with cryptocurrencies. By offering custody services, United States Bancorp is positioning itself to capture a share of this growing market, providing a secure and compliant solution for institutional clients to store their digital assets.

United States Bancorp initially launched its cryptocurrency custody services in 2021 in collaboration with the financial technology company NYDIG. However, the bank temporarily halted these plans following the issuance of guidelines by the U.S. Securities and Exchange Commission (SEC) that required custodians to hold capital for such activities on their balance sheets. The SEC subsequently withdrew this requirement, paving the way for United States Bancorp to resume its services.

The bank, headquartered in Minneapolis, has been working with NYDIG to reintroduce the service. Stephen Philipson, the head of the bank's wealth, enterprise, commercial, and institutional banking division, stated that the bank will initially offer Bitcoin custody services to traditional registered funds and exchange-traded fund (ETF) providers that have exposure to Bitcoin. Philipson also mentioned that the bank is exploring ways to integrate cryptocurrencies and stablecoins into its wealth management, payments, and consumer banking divisions.

The digital asset custody sector has traditionally been dominated by companies focused on cryptocurrencies. However, under the new administration, regulatory updates are expected to encourage larger enterprises to expand their involvement in this area. In March, the Office of the Comptroller of the Currency (OCC) stated that banks can engage in digital asset activities, including providing custody services, without prior approval.

Other major financial institutions, such as New York Mellon Bank and Fidelity Investments, also offer digital asset custody services. They compete with cryptocurrency companies like Coinbase, BitGo Holdings Inc., and Anchorage Digital, the latter being the only cryptocurrency custodian with a federal trust bank charter. Philipson noted that United States Bancorp already has a plan in place and is ready to execute it, with potential for further expansion based on market demand and developments.

A spokesperson for the bank indicated that United States Bancorp will consider offering custody services for other cryptocurrencies besides Bitcoin, provided they meet the necessary standards. This move by United States Bancorp is likely to have broader implications for the cryptocurrency industry. As more traditional financial institutions enter the market, it could lead to increased legitimacy and mainstream acceptance of digital assets, attracting more institutional capital and driving the growth and development of the cryptocurrency ecosystem. The involvement of established banks like United States Bancorp could also help bridge the gap between traditional finance and the emerging world of digital assets, fostering greater collaboration and innovation within the industry.