US Bancorp reboots crypto custody after Trump-era rule change
News Summary
US Bancorp has re-entered the crypto space by relaunching its digital asset custody services aimed at institutional investment managers. This move follows a regulatory shift under the current Donald Trump administration, which rolled back a previous SEC rule that mandated banks to hold capital on their balance sheets for crypto-related activities. US Bancorp, the fifth-largest commercial bank in the US, initially launched its custody service in 2021 but paused it due to the SEC guidance. The bank plans to scale the service with demand and explore digital assets in wealth management and consumer payments. Initially, it will offer Bitcoin custody for registered investment funds and Bitcoin ETF providers, with potential expansion to other cryptocurrencies that meet its risk standards. While crypto-native firms like Coinbase and BitGo have led the custody space, changes in federal guidance, particularly from the Office of the Comptroller of the Currency, are now giving traditional banks more operational leeway. Other major financial institutions, including BNY Mellon, Deutsche Bank, and Citigroup, are also actively moving into or considering offering crypto custody services.
Background
As of 2025, the administration of President Donald Trump (re-elected in November 2024) has implemented regulatory reforms, specifically rolling back a US Securities and Exchange Commission (SEC) rule that previously compelled banks to hold additional capital for their crypto-related activities. This rule was widely seen as a significant impediment to bank participation in the digital asset market at the time. US Bancorp had initially launched crypto custody services in 2021 but was forced to pause due to the restrictions imposed by the aforementioned SEC guidance. Now, with the favorable shift in the regulatory environment, the bank is reactivating its digital asset strategy. This trend is also prompting other traditional financial giants such as BNY Mellon, Deutsche Bank, and Citigroup to establish or expand their crypto custody offerings, signaling an accelerating convergence of traditional finance and digital assets.
In-Depth AI Insights
What are the deeper drivers behind the Trump administration's regulatory shift enabling traditional finance's crypto push? - The key lies in the Trump administration's pragmatic and innovation-promoting stance towards the cryptocurrency sector, contrasting with potentially more cautious or restrictive approaches seen previously. This suggests a governmental priority to maintain US competitiveness in global finance by embracing emerging technologies, rather than solely focusing on risk aversion. - Regulatory relaxation is not merely a technical adjustment; it's a strategic signal aimed at encouraging capital inflow into the digital asset market, potentially viewing it as a new economic growth engine. This provides clear policy support for traditional financial institutions, reducing their legal and capital costs for market entry, thereby accelerating the mainstreaming of cryptocurrencies. What are the structural impacts on the digital asset market as major banks increase their crypto custody presence? - The entry of large banks provides institutional investors with a more familiar, regulated pathway to crypto exposure, significantly boosting the legitimacy and trustworthiness of digital assets. This could attract previously passive institutional capital held back by regulatory uncertainty or risk concerns. - The competitive landscape will undergo profound changes. Crypto-native custody firms will face direct competition from traditional banks with deep pockets, vast client bases, and established compliance infrastructures. This could lead to service standardization, increased fee competition, and an overall elevation of compliance standards across the industry. - In the long run, bank participation may accelerate the deep integration of digital assets with traditional financial products and services, for example, incorporating them into wealth management, trusts, or even collateral systems, thereby expanding the potential market size and application scenarios for digital assets. Beyond custody services, what deeper strategic plays might US Bancorp and other traditional banks be making in the digital asset space? - Custody services are often the initial step for banks entering the digital asset ecosystem, with the ultimate goal likely being to leverage their existing client relationships and infrastructure to build comprehensive digital asset service platforms. This could include digital asset trading execution, lending, asset management, tokenized securities issuance, and even participation in Central Bank Digital Currency (CBDC) development and distribution. - These banks are likely preparing for a future shift in financial infrastructure, where some traditional financial operations will be enabled by blockchain technology. By establishing foundational services like custody early, they can maintain a leading position in technological evolution and adapt to evolving client needs. - Furthermore, the entry of traditional banks may also be accompanied by strategic investments in or acquisitions of technology providers and crypto companies to acquire critical technology, talent, and market share, thereby building a competitive advantage in the rapidly developing digital asset sector.