U.S. Bank to Launch Crypto Custody

U.S. Bank is rolling out a custody service for digital assets and will administer NYDIG’s bitcoin exchange traded fund this year pending regulatory approvals. 

The fifth-largest bank in the US by assets is moving forward with its plans in an effort to meet increasing demand by pension funds, insurance companies and other institutional clients to invest in digital assets, Christine Waldron, U.S. Bank’s strategy chief, told Blockworks Tuesday.

It follows the Bank of New York Mellon and State Street, both of which have made similar announcements in recent weeks.

“That’s the best part of this story: that you’re really seeing the institutions saying, ‘this is an asset class that is here to stay, and we need to now make sure we’re putting that appropriate rigor around it,’” Waldron said.

U.S. Bank saw the trend coming

U.S. Bank has been developing its “blockchain initiatives” since 2015, Waldron said. They include an RFP to expand its custody network to include cryptocurrency custodians, its ability to service digital asset funds like NYDIG (a longstanding client of the bank’s), and its investment in Securrency, a financial technology firm focused on bringing crypto compliance tools to banks and financial institutions.

“We had the benefit of putting a lot of infrastructure in place early on to help our clients,” Waldron said. “We saw this trend coming, and we were in a really good position to help them meet the market needs and demand.”

Waldron said the bank has selected its sub-custodian for storing digital assets but has yet to reveal that partner as it finalizes risk management, compliance and operational integration processes.

U.S. Bank also said it will also administer NYDIG’s bitcoin exchange-traded fund this year, pending regulatory approvals. NYDIG, the digital asset subsidiary of Stone Ridge Asset Management, filed for a bitcoin ETF in February, joining Galaxy Digital, Fidelity, Van Eck, Grayscale and others vying for SEC approval for a bitcoin ETF.

Have to hold

Waldron said that’s just the first U.S. Bank has been named in, but that it’s been working closely with “a few” other clients to file their S-1s (the Securities and Exchange Commission filing companies submit when planning to go public, to register their securities) establishing cryptocurrency ETFs. 

“This product is going to come to market at some point here,” she said.

Despite U.S. Bank’s work dating back several years, Waldron said the landscape began to shift in October, when the US Office of the Comptroller of the Currency confirmed banks can hold stablecoin reserves as a service to bank customers. 

“You saw huge institutional investor money flow starting to come in and then you really heard the rhetoric with all of these third-party investment managers saying ‘cryptocurrency is going to be one of these things we’re going to maybe want to add into our portfolio. It may not be our primary investment objective, it may not even be something we want to hold long-term, but it’s something we’re going to end up having to hold,’” Waldron said.