U.S. Bank Launches Cryptocurrency Custody Services Amid Strong Demand From Institutional Clients
US Bank, the nation’s fifth-largest retail bank, announced on Tuesday that its cryptocurrency custody service is available to fund managers.
According to Gunjan Kedia, vice president of the bank’s wealth management and investment services division, the offer will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with the assistance from sub-custodian NYDIG. Support for other coins like Ethereum is expected over time, Kedia said.
According to CNBC reports, the move is the latest sign that established financial players are starting to accept cryptocurrencies as a legitimate asset class. In the area of custodian banks, which verify and protect trillions of dollars in traditional assets for fund managers, major players such as Bank of New York Mellon, State Street and Northern Trust have all announced their intention to retain digital assets.
“Our clients take the potential of cryptocurrency as a diverse asset class very seriously,” Kedia said in an interview. “I don’t think there is a single asset manager who isn’t thinking about it right now.”
The American bank, which was founded during the Civil War in 1863, is one of the top 10 players in custody with more than $ 8.6 trillion in assets under custody and administration, according to data from the Federal Deposit Insurance Corp.
After a key regulator released a document last year establishing that domestic banks could have custody of crypto assets, Kedia surveyed the firm’s biggest clients to determine if their interest was real. She found that interest in crypto was wide and not limited to niche players and customers wanted the bank to scale fast.
“What we were hearing across the board is that while every currency might not survive – there might not be room for thousands of coins – there is something about the potential of this. asset class and the underlying technology that it would be prudent for us to stand up. support for this ”, she said.
Some investment clients already have positions in bitcoin, while others are waiting for custody services to start, she said. US Bank is one of the first institutions to offer a direct custody product, Kedia said.
The price of bitcoin has skyrocketed this year, reaching an all-time high of around $ 64,000 in April before losing half of its value the following month. But the original cryptocurrency has proven resilient: it resisted China’s decision to ban digital currency last month, and on Tuesday morning it hit $ 50,000 again.
There is irony in the fact that while bitcoin was created to eliminate financial intermediaries, parts of the old financial order are being recreated to respond to digital currencies. After all, fund managers might choose to store their own cryptocurrency keys. But managers want the imprimatur of established names like US Bank to help allay the concerns of their own customers, Kedia said.
In order to embed a manager into the crypto product, the US bank must trace the origin of the client’s funds into industry standard anti-money laundering and anti-money laundering standards. “Know your customer” checks, she said.
The product is only intended for institutional managers with private funds in the United States or the Cayman Islands, according to the bank. But if and when the U.S. Securities and Exchange Commission approves a bitcoin ETF, demand is expected to increase.
“We have a lot of funds that hope to invest in ETFs”, Kedia said. “Some literally want custodial contracts to be signed on the day the SEC approves an ETF.”
The US bank first established its Blockchain and Cryptocurrency practice in 2015, when the price of bitcoin was below $ 200. The price of BTC hovers around $ 51,000 at the time of writing.
The bank announced the launch of three cryptocurrency offerings in April to address the “Growing customer needs”. The first was the on-call service which is now live. The second was an investment in Securrency, a developer of institutional grade blockchain-based financial and regulatory technologies. The third was that US Bank had been selected to administer NYDIG’s bitcoin ETF this year, pending regulatory approvals.