Institutional cryptocurrency custody and the evolving regulatory landscape

Recent momentum in regulatory guidance, market adoption and investor interest has given rise to new digital currency opportunities for banks. But why now?

A key driver for this development was the Securities and Exchange Commission’s (SEC) issuance of Staff Accounting Bulletin (SAB) 122, rescinding the previous restrictive guidance under SAB 121. SAB 122 introduced a more flexible regulatory regime, aligning crypto-asset accounting with established contingency principles. Moreover, U.S. lawmakers have recently advanced the GENIUS, CLARITY and Anti-CBDC acts, with the GENIUS act being formally signed into law. Collectively, these bills seek to bring greater regulatory clarity to the digital asset industry, which some see as being long overdue.

To dig into what this activity means for cryptocurrency banks and for clients, we sat down with our blockchain and custody experts at U.S. Bank. Below they answer six questions about institutional cryptocurrency custodians to help you better understand your options in this space.

1. What are the advantages of using the same custodian for cryptocurrency and non-cryptocurrency assets?

Before U.S. Bank’s cryptocurrency custody launch, clients had to split portfolios across providers. Now, they can manage all custody assets in one place – increasing control, visibility and scalability. Institutional investors using a single, well-established custodian like U.S. Bank benefit from streamlined operations and a single point of contact for custody related activity.

Another advantage is that institutions can reduce administrative overhead and complexity by consolidating assets with a single custodian. For instance, the simplified reporting provided by a single custodian helps institutions meet compliance and regulatory requirements, such as audits and customer reporting, making it easier to demonstrate compliance. This can lead to better pricing and additional services.

Lastly, U.S. Bank offers additional services beyond pure custody, including portfolio management, administration and accounting, which provide greater integration between different parts of the investment and full service offering.

2. What are the key differences between retail and institutional cryptocurrency investing?

The primary differences lie in scale, access and regulation. Retail investors are subject to consumer protection requirements with fewer compliance requirements, while institutional investors face extensive compliance requirements and regulatory oversight.

Retail investors usually buy and hold smaller amounts of cryptocurrency directly through exchanges like Coinbase. However, this creates a custody gap because most cryptocurrency custodians aren't equipped to handle traditional assets like listed securities. As a result, retail investors may face challenges in managing a diversified portfolio that includes both cryptocurrencies and traditional assets.

As a qualified custodian, U.S. Bank offers institutional investors investment-grade custody solutions and sophisticated risk management systems. Unlike other custodians, U.S. Bank seamlessly integrates both traditional and cryptocurrency investments, consolidating all fund assets on the same statements and reporting. This ensures a streamlined and efficient experience, making U.S. Bank the premier choice for institutional investors for cryptocurrency investing.

3. Are managers embracing cryptocurrency, or are they more hesitant?

U.S. Bank closely monitors the market and regulatory trends that may impact our client base. There are a wide range of views on cryptocurrency banks among our clients based on their goals and investment style. One client segment where we’ve observed a significant spike in interest is with exchange-traded fund (ETF) sponsors.

Since the SEC approval of spot bitcoin ETFs in January of 2024, we’ve observed a significant interest in these vehicles as measured by assets under management (AUM). According to statistics from coinmarketcap.com (as of July 2025), total AUM invested in Bitcoin ETF funds (year-over-year) has nearly tripled – from $50 billion in July of 2024 to nearly $150 billion in 2025. Year to date, this trend also holds true, with total AUM investment increasing 38%.

Further evidence of this trend can be seen in the popularity of Blackrock’s IBIT product, which has amassed a total market cap of nearly $85 billion. Regulatory catalysts, such as the CLARITY act, have created a much more favorable environment for cryptocurrency investment. While some in the fund management community continue to maintain a ‘wait and see’ approach before adding cryptocurrency exposure to their investment strategies and portfolios, many have already made this leap.

4. Bank custody of cryptocurrency assets isn’t that common right now, and it’s somewhat of a differentiator. Do you see that changing in the future?

While assets held by cryptocurrency custodians currently represent a small fraction of total assets under custody at major banks, this segment is expanding rapidly. We see significant potential for growth and innovation in our cryptocurrency offering, and we’re committed to evolving it in step with market demand. Over time, we anticipate more banks will follow our lead, recognizing the strategic importance of digital asset custody in the broader financial ecosystem.

5. What experience or expertise should asset and investment managers look for to give them confidence in their cryptocurrency custodian?

When selecting a cryptocurrency custodian, it’s essential to look for a provider with a strong reputation, a risk-based approach and a long-standing history of safeguarding client assets. At U.S. Bank, we’ve been a trusted custodian of securities and cash for over 150 years.

Now, we’re bringing that legacy of security and reliability into the digital asset space. Through our partnership with NYDIG – our cryptocurrency technology provider and sub-custodian – we offer cryptocurrency custody services that combine institutional-grade security with deep cryptocurrency-specific expertise. Clients can rely on the same quality, reliability and trustworthiness they’ve come to expect from U.S. Bank, now extended to their digital assets.

6. What risk management controls help keep cryptocurrency products safe and secure in custody?

This is a critical question, especially for institutional investors, as selecting the right cryptocurrency custodian requires a thorough evaluation across several key risk-management dimensions. Institutional investors should understand the custodian’s compliance and oversight framework, technology infrastructure, counterparty risk assessment and disaster recovery frameworks.

As a qualified custodian, U.S. Bank has a well-established and robust risk management framework that includes enterprise-grade security measures such as encryption, secure infrastructure with redundancy and disaster recovery. Our risk management framework, combined with our cryptocurrency technology partner and sub-custodian, NYDIG, establishes operational controls and procedures for key management and cold storage (completely offline) of holdings, along with regular oversight. A key component of our risk management is performing know-your-customer (KYC) and know-your-transaction (KYT) anti-money laundering (AML) protocols, in addition to a comprehensive cybersecurity framework.

When we onboard a digital currency client at U.S. Bank, we prioritize upfront KYC and establish the provenance of funds by screening customers, leveraging blockchain analytics and utilizing internal systems. We use internal data combined with blockchain analytics to develop a client baseline. From the baseline we continuously monitor for unusual activities and escalate transactions that deviate from expectations and require extra scrutiny.

For cryptocurrency accounts, only our cryptocurrency technology partner and sub-custodian, NYDIG, has access to the private key. The public key is given to the client and pertinent operational teams within U.S. Bank.

Together with NYDIG, we provide a custody solution that institutional clients can trust, built on a foundation of security, transparency and operational excellence.

U.S. Bank offers customized operational solutions combined with the strength and security of a major financial institution. To learn more, visit our website or connect with our team.