U.S. Bank
"Investor interest in cryptocurrency and demand from our fund services clients have grown strongly over the last few years," said Gunjan Kedia, vice-chair of U.S. Bank Wealth Management and Investment Services in a press release. "Our fund and institutional custody clients have accelerated their plans to offer cryptocurrency and, in response, we made it a priority to accelerate our ability to offer custody services."
Launched in collaboration with NYDIG, the first sub-custodian to partner with U.S. Bank, the service will act as a repository for private keys tied to Bitcoin, Bitcoin Cash, and Litecoin, with Ethereum support not far off on the horizon.
Custody banks safeguard trillions in assets and secure the flow of institutional money, and US Bank is a giant among these institutions, safeguarding $8.6 trillion in assets according to the FDIC.
Yet it was only last year that the US Office of the Comptroller of Currency certain banks approval to act as custodians of crypto assets on behalf of their clients. The regulation paved the way for US Bank's new service and other competing offerings from State Street
The burgeoning market for crypto custodial services signals the asset classes growing legitimacy among institutional investors for the asset class itself.
"Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class," Kedia told CNBC in an interview. "I don't believe there's a single asset manager that isn't thinking about it right now."
After the OCC approval, Keida told the network that she put feelers out among her biggest clients to gauge their interest in such a service and found that interest was widespread, genuine, and urgent.
"What we were hearing across the board, is that while every currency might not survive... there's something about the potential of this asset class and the underlying technology that would be prudent for us to stand up support for it," she told CNBC.
She said some clients already have stakes in Bitcoin, adding that others were waiting for crypto-custody services to come online. Others still, she said, were waiting for a service from a pedigreed institution like U.S. Bank in hopes that the branding might assuage wary clients.
Kedia noted that any fund manager who signs up for the service must prove the origin of their client's money according to normal anti-money laundering standards.
While Crypto-custody represents a whole new financial service, regulatorily speaking, a Bitcoin-based ETF is a whole new class of investment. The United States Securities and Exchange Commission is still weighing approval for such an ETF.
If and when the green light is given, Keida expects demand for the service to rise even further.
"We have a lot of funds who are hoping to invest in ETFs," she said in the interview. Some literally want custody contracts signed the day the SEC approves an ETF."
