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US Bancorp ( USB ) partners with NYDIG for bitcoin custody service

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SEC's previous guidance made crypto custody

capital-intensive

for banks

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Spot bitcoin ETFs gain popularity, attracting banks'

interest in

custody services

By Hannah Lang

Sept 3 - U.S. Bancorp ( USB ) 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 That guidance was repealed earlier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 has indicated 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.