By
Temitope Olatunji
April 15th, 2024
The US Bank Bitcoin custody service is going to be available to investment asset managers operating from either the United States or the Cayman Islands.
American bank holding company, US Bancorp (NYSE: USB) has finalized its plans to launch Bitcoin or cryptocurrency custody services for its institutional clients. As reported by CNBC, the firm is on track to unveil the plan as early as Tuesday, and it will be available to fund managers.
Per the report, the cryptocurrency custody services will let investment managers store private keys for their own client’s Bitcoin (BTC), Bitcoin Cash (BCH), and Litecoin (LTC), with future plans to integrate Ethereum (ETH). The projected service offering according to CNBC will see draw assistance from another third-party crypto-asset custodian, NYDIG as confirmed by Gunjan Kedia, US Bank’s vice-chair of wealth management and investment services division.
According to Kedia, the move to offer the custody service was preceded by a comprehensive survey of the needs of its existing clients.
“What we were hearing across the board, is that while every currency might not survive – there may not be room for thousands of coins – 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,” Kedia said.
The US Bank executive also noted that the permission granted to financial institutions by the Office of the Comptroller of the Currency (OCC) allowing them to provide custody services has driven a massive interest amongst banking outfits in the country.
“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” Kedia said, adding. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”
“While the core design of digital currencies permits them to be handled by the owners, hedge funds and other asset managers notably employ the services of custody providers to gain trust amongst their own clients”, Kedia noted.
US Bank Bitcoin Custody Service: Regional Restrictions
The US Bank Bitcoin custody service is going to be available to investment asset managers operating from either the United States or the Cayman Islands according to Kedia. She noted that for US Bank to onboard any client, the origin of the client’s funds must be traced in line with the industry’s standard as it concerns anti-money laundering and “Know Your Client” checks.
While it appears as though the US Bank custody service is limited in the number of customers it can onboard, Kedia said the demand is expected to rise remarkably if, and when the US Securities and Exchange Commission (SEC) approves its first Bitcoin or crypto-backed Exchange Traded Fund (ETF) product. “We have a lot of funds who are hoping to invest in ETFs,” Kedia said. “Some literally want custody contracts signed the day the SEC approves an ETF.”
Besides US Bank, other major players including Goldman Sachs Group Inc (NYSE: GS), and BNY Mellon (NYSE: BK) have also announced similar custodial services.