People wait in line outside a U.S. bank mobile location on July 8, 2020 in Minneapolis, Minnesota.
Stephen Tire | Getty Images
The race for institutional investors who want to bet on cryptocurrency is getting hotter.
The US Bank, the fifth largest retail bank in the country, announced Tuesday that its cryptocurrency custody service is available to fund managers, CNBC was the first to report.
The offering will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with the assistance of NYDIG sub-custodian, said Gunjan Kedia, vice chairman of the bank’s wealth management and securities services division. Support for other coins like Ethereum is expected over time, Kedia said.
The move is the latest sign that established financial players are accepting cryptocurrencies as a legitimate asset class. In the space of custodians vetting and protecting trillion-dollar traditional assets for wealth managers, major players like the Bank of New York Mellon, State Street and Northern Trust have all announced plans to hold digital assets.
“Our customers take the potential of cryptocurrency as a diversified asset class very seriously,” said Kedia in an interview. “I don’t think there is a single asset manager who doesn’t think about it right now.”
Gunjan Kedia, vice chairman of the bank’s wealth management and investment services department.
Courtesy: US Bank
Established during the Civil War in 1863, the US Bank is, according to the Federal Deposit Insurance Corp.
After a key regulator published a paper last year stating that national banks could hold crypto assets, Kedia surveyed the company’s largest customers to see if their interest was genuine. She found that interest in crypto was widespread, not limited to niche providers, and that customers wanted the bank to act quickly.
“What we’ve heard consistently is that while not every currency could survive – there may not be room for thousands of coins – the potential of this asset class and underlying technology has something about it that would make sense for us to stand up for support for that, ”she said.
Some investment clients already have positions in bitcoin while others are waiting for custody services to begin, she said. The US bank is one of the first institutions to have a live custody product, Kedia said.
Bitcoin price has skyrocketed this year, rising to an all-time high of around $ 64,000 in April before losing half of its value the next month. But the original cryptocurrency has proven resilient: it weathered China’s move to ban digital currency last month, and hit $ 50,000 again early Tuesday.
It’s ironic in the fact that while Bitcoin was created to shut out financial middlemen, parts of the old financial order are being recreated to accommodate digital currencies. Finally, fund managers could store their own cryptocurrency keys. However, managers want the imprimatures of established names like US Bank to help allay their own clients’ concerns, Kedia said.
To get a manager involved in the crypto product, the US bank must track the origin of customer funds through industry-standard anti-money laundering and “know your client” checks, she said.
According to the bank, the product is only intended for institutional managers with private funds in the USA or the Cayman Islands. But if the US Securities and Exchange Commission approves a Bitcoin ETF, demand is expected to rise.
“We have a lot of funds that are hoping to invest in ETFs,” said Kedia. “Some literally want custody contracts signed the day the SEC approves an ETF.”
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