US Bancorp launches cryptocurrency custody for investment managers

abdelaziz Fathi

US Bancorp (US Bank), which has more than $8.6 trillion in assets under custody, and New York Digital Investment Group (NYDIG) have collaborated to launch an institutional-grade custody solution for cryptocurrencies.

Originally announced in April, the fifth-largest banking institution in the United States says it is responding to demand from institutional investors that see cryptocurrencies as an asset class they would like to invest in.

In particular, the new custody service is open for institutional investment managers who have private funds in the United States and Cayman Islands.

The Minneapolis company has developed some of the infrastructure needed for cryptocurrency custody in partnership with NYDIG. This includes anti-money-laundering and KYC checks, while the bitcoin-focused financial services firm was chosen for storing private keys.

The collaboration is powered by NYDIG’s regulated bitcoin platform, which is the cryptocurrency arm of Stone Ridge, a $10 billion alternative asset manager.

While there are plans to expand to other digital assets, US Bancorp’s custody solution currently supports two cryptocurrencies, Litecoin and Bitcoin Cash.

“Investor interest in cryptocurrency and demand from our fund services clients have grown strongly over the last few years. 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,” Gunjan Kedia, vice chair of the bank’s wealth management and investment services said.

In simple terms, a custodian is a financial institution that holds assets, in both electronic and physical forms, on behalf of its clients to ensure that they are kept safe and secure. In the blockchain space, a custodian service does the same thing but exclusively for digital currencies and tokens.

Banks have been moving to offer cryptocurrency investment products because they are seeing deep-pocket investors sending money to crypto exchanges and digital-asset managers, such as Coinbase and Grayscale.

This trend has gained momentum due to growing institutional demand as the cryptocurrency market matures after a huge run-up in prices over the past couple of years.

JPMorgan Chase has already begun giving its wealthy clients access to six cryptocurrency investment funds. However, it was not the only financial institution exploring the potential of cryptocurrency as part of its efforts to modernize their legacy investment vehicles.

Goldman Sachs also reopened a trading desk to make markets in cryptocurrencies back in March. Having worked out security issues such as how it would custody the assets, the New York-based bank now is using its own money to trade with clients in a variety of non-deliverable forwards linked to the price of Bitcoin.

Elsewhere, Morgan Stanley also got involved in cryptocurrencies, launching access to three funds that enable ownership of bitcoin. The bank’s wealthier clients with “an aggressive risk tolerance” and have at least $2 million in assets can invest up to 2.5% of their net wealth in bitcoin funds.

BNY Mellon also revealed plans in February to provide its clients with ‘an integrated service’ for digital assets, which covers classic cryptocurrencies and could be extended to stablecoins.

Read this next

Digital Assets

Ripple and Lithuanian FINCI partner for XRP-based payments

Ripple is looking to expand its presence in Europe, forming a new partnership with Lithuanian electronic money institution FINCI.

Digital Assets

Crypto.com enables Shopify merchants to accept crypto payments

Crypto.com has integrated with Canadian e-commerce giant Shopify so global merchants can accept crypto payments and save on processing fees through cash-final settlements.

Institutional FX

FX volume drops 13pct at CLS Group in April 2022

FX settlement specialist CLS Group today reported that the executed volumes of currency trading on its platforms were notably down in April.

Crypto Insider, Opinion

Regulation: The Gold-Standard for Crypto-Assets

When the US supervisory authority SEC allowed an investment product referencing Bitcoin futures to be traded for the first time last October, this was widely perceived as a signal that cryptocurrencies had finally become established as an asset class.

Executive Moves

Solid hires FX industry veteran Darren Barker for multi-bank ECN’s business development

His curriculum vitae includes former roles at Cantor Fitzgerald, Sucden Financial, R.J. O’Brien, Jefferies, Natixis, Unicredit, J.P. Morgan, Raiffeisen, RBS International, UBS, Deutsche Bank, and Citi. 

Inside View

Mihails Safro, xpate CEO: Tips sellers need to know to overcome compliance obstacles

The unprecedented growth of e-commerce changed shopping dramatically last year. Many sellers suddenly faced a rapidly growing number of customers who had to stay home during the lockdown. When some clients adopted Netflix and Spotify as part of a daily routine, others ventured into online business. Robinhood alone saw a whopping 6 million rise in user numbers in 2 months. 

Institutional FX

BMLL delivers Level 3 data to Kepler Cheuvreux for order book analytics and algo performance

The solution covers more than 6.5 years of harmonised historical data from 65 venues and combines it with easy to use APIs and analytics libraries in a secure cloud environment. 

Digital Assets

Crypto Is An Invaluable Tool In The Fight Against Financial Oppression  

Crypto has proven itself to be much more than just a hot investment. Indeed, some say it’s poised to play a critical role in the future of finance

Executive Moves

Parameta appoints Head of Benchmark and Indices with a focus on ESG and rates

The firm said building out its benchmarks & indices offering will now be a core priority, with a particular focus on the ESG and rates space.

<