On Tuesday (October 5), it appears as though U.S. Bank National Association (a.k.a. “U.S. Bank”), the fifth-largest commercial bank in the United States based on the most recent Federal Reserve data, started a crypto custody service geared toward investment managers.
This new service will “help investment managers store private keys for bitcoin, bitcoin cash, and litecoin with assistance from sub-custodian NYDIG,” according to a report published earlier today by CNBC. Gunjan Kedia, the vice-chair of the bank’s wealth management and investment services division, told CNBC that this new service will “support other coins like ethereum over time.”
On April 27, the United States Bank announced three new crypto-related initiatives through a blog post: “With the engagement of a sub-custodian for fund servicing, US Bank Global Fund Services will offer a new cryptocurrency custody solution to consumers. We are nearing completion of our selection of a sub-custodian and will provide additional specifics in the coming weeks after internal reviews are complete.“
“We recently announced our investment in Securrency – a developer of institutional-grade blockchain-based financial and regulatory technology, which named U.S. Bank among investors in its latest round of funding.“
“Subject to regulatory clearances, US Bank has been selected to operate NYDIG’s ETF bitcoin fund this year. It builds on the bank’s long-standing relationship with NYDIG in the area of private fund servicing.“
Other large US institutions, like Bank of New York Mellon, State Street, and Northern Trust, have already disclosed their crypto custody plans. Additionally, Kedia told CNBC that every investment firm she knows believes in cryptocurrency’s “potential as a varied asset class.”
According to Kedia, following the Office of the Comptroller of the Currency’s (the “OCC”) release of Interpretive Letter #1170 on 22 July 2020, allowing OCC-regulated banks to custody virtual assets, Kedia “surveyed the firm’s largest clients to determine if their interest was genuine” and discovered that “interest in crypto was broad and not limited to niche players, and clients desired the ability to trade crypto.”
According to her statement on CNBC: “What we heard across the board is that, although not every currency will survive – there may not be enough space for hundreds of coins – there is something about the promise of this asset class and the underlying technology that makes it smart for us to provide support.“
Additionally, she stated that US Bank is “one of the first banks to offer a live custody solution.” She continued by stating that before having to accept an asset manager as a client for the crypto custody service, the bank must “trace the origin of the client’s funds” (i.e. adhere to anti-money laundering regulations) and that this product is only available to “institutional managers with private funds in the United States or the Cayman Islands, according to the bank.”
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