US Bancorp, a heavyweight in the American banking sector, has made a strategic decision to relaunch its custody services for digital assets, focusing on Bitcoin (BTC) to start. This move is primarily aimed at institutional clients, such as registered investment funds and providers of spot Bitcoin exchange-traded funds (ETFs). Since early 2025, the demand for these services has skyrocketed, which suggests that institutional investors are increasingly eyeing digital assets.
The custody platform was originally launched back in 2021 through a partnership with NYDIG, a fintech firm. Yet, it hit a pause button in 2022 after the SEC dropped Staff Accounting Bulletin 121 (SAB 121) on the scene. This bulletin mandated banks to classify crypto held in custody as a liability on their balance sheets. Banks, of course, found this accounting requirement to be a financial nightmare.
Now that the SEC has rescinded SAB 121 in January 2025, US Bancorp is ready to dive back into the digital asset space. Stephen Philipson, who heads US Bank’s institutional division, mentioned that they're “reopening its playbook,” hinting that they might consider adding more cryptocurrencies to their custody services as soon as they meet internal compliance measures.
What’s the Regulatory Landscape Like?
Regulatory changes have played a significant role in how traditional banks are engaging with digital assets. The SEC's decision to rescind SAB 121 has notably removed some roadblocks, giving banks a more substantial foothold in the digital asset arena, including custody services. This is part of a larger trend where financial institutions are starting to warm up to digital assets, thanks to changing regulatory attitudes and soaring client demand.
Additionally, U.S. federal banking regulators—including the OCC, Federal Reserve, and FDIC—have made it clear that banks have the legal authority to engage in crypto custody and provided risk management guidance. This clarity legitimizes crypto custody as a banking function, paving the way for more traditional financial institutions to wade into the waters.
As banks like US Bancorp build back their digital asset services, they are not just responding to regulatory changes, but also to institutional demand for Bitcoin exposure. The interest from big players, like BlackRock's iShares Bitcoin Trust managing over $80 billion in assets, shows that traditional banks can thrive in this new landscape.
What Do Fintechs Bring to the Table?
Fintech startups have several competitive advantages over traditional banks as the crypto landscape evolves. These advantages stem from their nimbleness, tech-savviness, and focus on customer experience.
First, fintechs are unshackled by legacy systems or complex regulations, allowing them to adopt new technologies like blockchain and crypto quickly. This translates to faster product development, especially in areas like decentralized finance (DeFi) and asset tokenization.
Secondly, they excel at providing personalized, easy-to-use digital experiences. Leveraging data and AI, fintechs offer services accessible 24/7 via mobile apps and online platforms, which is a stark contrast to the more standardized services of traditional banks.
Additionally, their lean organizational structures and minimal physical infrastructure allow them to offer financial products and services at much lower costs than traditional banks, which are burdened by extensive real estate and larger workforces.
Finally, their early adoption of cryptocurrencies enables them to innovate in Web3 and digital asset integration more swiftly than traditional banks, which are often playing catch-up.
How Will SMEs Benefit?
The resurgence of crypto custody services offers considerable advantages for small and medium-sized enterprises (SMEs). With traditional banks like US Bancorp rolling out their services, SMEs can tap into several benefits.
For one, crypto custody banks provide secure, regulated asset management, minimizing operational risks and ensuring compliance with emerging regulations.
Moreover, custodian banks are broadening their service offerings from mere safekeeping to include analytics, trading, pricing, and payments for crypto assets. This all-in-one approach allows SMEs to manage their crypto alongside traditional assets more effectively.
They can also save on transaction fees by using crypto payment platforms, which is essential for SMEs that operate on tight margins. Plus, crypto transactions are processed almost instantly, boosting cash flow and enabling SMEs to act quickly on market opportunities.
Access to global markets is another bonus, as cryptocurrencies help SMEs bypass banking restrictions for cross-border trade, especially in regions lacking traditional banking infrastructure.
Lastly, with recent regulatory changes easing the pressure on banks holding crypto assets, SMEs benefit indirectly through simplified crypto integration and increased service availability.
What’s Next for Banking?
The revival of crypto custody services and traditional banks' acceptance of digital assets indicate a transformative shift in the financial landscape. As banks like US Bancorp engage with digital assets, they adapt to regulatory changes and institutional demand.
This evolution holds several implications for the future of banking.
First, increased competition between traditional banks and fintech startups will drive better customer service, product offerings, and pricing.
Second, the developing regulatory frameworks for digital assets will provide clearer guidelines, fostering a safer environment for consumers and businesses.
Third, traditional banking and digital finance will continue to integrate, leading to more comprehensive financial services.
Finally, as banks expand their digital asset offerings, security and compliance will take center stage to maintain client trust.
In summary, the future of banking in a crypto-centric world will be marked by increased competition, enhanced regulatory frameworks, and greater integration between traditional and digital finance. Traditional banks will play a crucial role in shaping this new financial ecosystem as they adapt to these changes.
