FILE PHOTO: A representation of the virtual cryptocurrency Bitcoin is seen in this picture illustration taken October 19, 2021. REUTERS/Edgar Su/File Photo
-U.S. Bancorp is restarting its bitcoin custody service after a more than three-year pause, as the Trump administration's pro-crypto posture has encouraged traditional financial institutions to delve deeper into digital assets.
U.S. Bank's bitcoin custody program - which the firm first announced it would offer in 2021 - is geared toward institutional investment managers with registered or private funds, and for the first time, bitcoin exchange-traded funds. Crypto firm NYDIG will act as the sub-custodian, meaning NYDIG will provide custody of the underlying asset while U.S. Bank will serve as the client-facing intermediary, the bank said.
"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 U.S. Bank.
Bitcoin custody service involves an institution safeguarding bitcoin on behalf of a client.
Minnesota-based U.S. Bank's bitcoin custody offerings were jettisoned after the U.S. Securities and Exchange Commission in early 2022 issued an accounting bulletin that made it too capital-intensive for lenders to hold crypto tokens such as bitcoin on behalf of clients. That guidance was repealed earlier this year after U.S. President Donald Trump took office.
Since then, a spate of banks hasindicated their interest in providing various crypto services to their clients. Citigroup is also exploring custody services for digital assets that back crypto-related investment products, an executive told Reuters last month.
Banks have eyed asset managers that issue spot bitcoin ETFs as potential custody clients, particularly as those products have exploded in popularity amid bitcoin's soaring price this year.
Roughly a dozen asset managers have launched ETFs tracking the spot price of bitcoin since the SEC authorized such products last January. The largest bitcoin ETF, BlackRock's iShares Bitcoin Trust, has more than $80 billion in market capitalization.
Crypto exchange Coinbase dominates the custody business for spot bitcoin ETFs, and has previously said that it serves as the custodian for more than 80% of issuers of crypto ETFs.
(Reporting by Hannah Lang in New YorkEditing by Rod Nickel)
