U.S. Bank has revived its bitcoin custody service for institutional investment managers after pausing the program in 2022 due to regulatory uncertainties.
The service, first launched in 2021, is once again available through a partnership with NYDIG as sub-custodian.
Regulatory clarity enables relaunch
The bank paused its custody offering following a Securities and Exchange Commission bulletin that increased capital requirements for banks holding client bitcoin.
However, recent rescissions of Staff Accounting Bulletin 121 and related guidance by the SEC and Office of the Comptroller of the Currency have cleared the way for banks to resume such activities.
Laura Cote, U.S. Bank’s head of global fund services product, stated:
Those two pieces really let us accelerate our reassuming of the service.
ETF market growth drives demand
Since the debut of spot bitcoin ETFs in the U.S. in early 2024, U.S. Bank has seen substantial growth in its ETF business.
The bank now services 33 bitcoin funds on the administrative side and provides support for 15 funds following digital asset strategies.
Of all U.S.-listed ETFs, U.S. Bank services 24%, according to Cote.
Currently, U.S. spot bitcoin ETFs hold 6.16% of all bitcoin in existence, as tracked by Bitbo.
Institutional focus and NYDIG partnership
The decision to limit custody services to institutional managers is driven by client demand rather than retail interest, Cote explained.
Many institutional clients currently custody bitcoin with firms like Coinbase, but U.S. Bank sees an opportunity to offer a regulated alternative.
NYDIG, as in the 2021 iteration, will handle sub-custody of client bitcoin holdings.
NYDIG CEO Tejas Shah commented:
Together, we can bridge the gap between traditional finance and the modern economy by facilitating access for Global Fund Services clients to bitcoin as sound money, delivered with the safety and security expected by regulated financial institutions.
Shift from retail to institutional holdings
The rise of spot bitcoin ETFs has marked a shift from bitcoin as a largely retail-held asset to increased institutional participation.
The total market value of ETF bitcoin holdings now exceeds $144 billion, reflecting this transformation in the digital asset landscape.
