U.S. Bancorp reenters Bitcoin custody market in post-SEC landscape

U.S. Bancorp is reportedly reviving its Bitcoin custody business, betting that institutional demand now outweighs the perceived regulatory risks. The bank had shelved the service for three years due to prohibitive capital requirements imposed by the SEC.

According to a Reuters report on September 3, the Minnesota-based bank is relaunching the service specifically for institutional investment managers and, critically, for the first time, spot Bitcoin (BTC) exchange traded funds.

In a hybrid model, U.S. Bank will act as the primary, client-facing intermediary, while crypto firm NYDIG will serve as the sub-custodian, holding the actual digital assets. The relaunch came after the repeal of the SEC’s Staff Accounting Bulletin 121 (SAB 121) earlier this year, a rule that had forced banks to hold capital against crypto held for clients, stalling their entry into the space.

Targeting the Bitcoin ETF custody gold rush

For U.S. Bank’s Stephen Philipson, the head of wealth, corporate, commercial, and institutional banking, this strategic pivot is about providing institutional comfort in a volatile market. He told Reuters that a “bank-owned provider that has that strength and stability and continuity gives clients a lot of comfort in an evolving part of the market.”

For managers running regulated funds, the ability to rely on a large, established institution rather than a crypto-native firm can be decisive, particularly as more capital flows into products tied directly to Bitcoin’s spot price.

U.S. Bancorp is not alone in making this calculation. The report noted that Citigroup is also actively exploring custody services for digital assets that back crypto-related investment products, signaling a broader trend of major financial institutions that are no longer just observing the digital asset space but are actively building the infrastructure to serve it.

Notably, the collective gaze of these institutions appears to be fixed on one primary target, the enormous and rapidly growing market of spot Bitcoin ETFs.

Spot Bitcoin ETFs in numbers

Since their landmark approval in January 2024, these ETFs have shattered traditional finance records. According to data from SoSoValue, these products have seen a staggering $54.57 billion in cumulative inflows. Their combined assets under management have ballooned to $143.2 billion, meaning they now custody an estimated 6.45% of the entire circulating Bitcoin supply.

The performance of these funds has been historic by traditional ETF standards. According to Bloomberg’s James Seyffart, the previous record for an ETF to reach $10 billion in assets was nearly three years. BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund shattered that benchmark, hitting the milestone in just 49 and 77 trading days, respectively.

This explosive growth seems to have placed immense pressure on the custody landscape, which has been heavily reliant on a very small number of crypto-native firms, including Coinbase, which claims to hold over 80% of ETF mandates. The arrival of banks like U.S. Bancorp could tilt the balance over time.