Bitcoin Custody at U.S. Bank: A Year On, Banks Push Into Crypto

The bank that came back

U.S. Bank's decision to restart bitcoin custody for institutional investment managers did not get much attention when it was announced in September 2025. Thirteen months later, it looks like one of the first signs of a broader change. Several major U.S. banks now plan to hold crypto directly, and the business of safeguarding fund assets has become the main point of competition.

The Minneapolis-based lender said it had reopened the cryptocurrency custody service it first announced in 2021. The relaunch began as an early access program for clients of its Global Fund Services business.11 The service is aimed at institutional managers running registered or private funds that need somewhere to keep bitcoin. NYDIG, a bitcoin financial services and power infrastructure company, acts as sub-custodian.12 The bank also widened the offering to cover bitcoin exchange-traded funds, a product category that did not exist when the program first launched.13

The bank has considerable scale. Its Wealth, Corporate, Commercial and Institutional Banking division reported more than $11.7 trillion in assets under custody and administration as of June 30, 2025. Its parent, U.S. Bancorp, had about $686 billion in assets.15

Why it stopped, and why it restarted

Coverage of the pause and the restart tells a consistent story. The cause was an accounting rule, not falling demand. The bank shelved the program in 2022 after the SEC's Staff Accounting Bulletin 121 made holding client crypto more capital-intensive for banks.18 SAB 121 took effect in March 2022. It required firms safeguarding crypto for customers to record those assets as liabilities on their own balance sheets.21 For banks, that gross-up carried regulatory capital consequences that made custody uneconomic at scale.22 Critics said the rule broke with the long-standing practice of keeping assets held in custody off the custodian's balance sheet.26

The effort to undo the rule went on for years. In May 2024, the House and Senate both voted to repeal SAB 121. That repeal legislation was later vetoed by President Biden.24 The SEC rescinded the rule itself with SAB 122 on January 23, 2025, shortly after Gary Gensler left the agency.30 In March 2025, the Office of the Comptroller of the Currency issued a notice confirming that banks could take part in certain crypto activities.18

Laura Cote, U.S. Bank's head of global fund services product, said those two changes together allowed the bank to bring the service back faster.18 She also said the bank had already won approval for the original program. That meant most of the work was reviewing earlier preparations and adjusting for ETFs.18 Some coverage added a third factor: in August 2025, the Federal Reserve ended a supervisory program that had monitored banks' crypto activities since 2023.19

Outlets described the regulatory picture differently. Several credited "regulatory clarity" in broad terms, following the bank's own announcement.16 Others pointed specifically to the accounting change.1814 The specific account is more useful. Lawyers had warned after the rescission that SAB 122 still requires custodians to assess contingent liabilities under standard accounting rules, and that bank supervisors were the bigger remaining obstacle.2527 The U.S. Bank relaunch suggests that by late summer 2025, supervisors were no longer blocking the way.

The ETF engine

The commercial reason is just as clear. Cote said the bank's ETF business had grown sharply since spot bitcoin ETFs launched in early 2024. At the time, it administered 33 bitcoin funds and 15 more with broader digital-asset strategies. It also serviced about 24% of the roughly 4,300 U.S.-listed ETFs.18 Many of those managers were keeping their bitcoin with Coinbase. Cote said that gap is where the bank saw an opening: it already handled fund administration and wanted to handle custody as well.18

This is the key point for anyone following the crypto companies market. Bank custody is a direct challenge to the crypto-native custodians that the ETF boom made rich. When a fund administrator can also hold the coins, the manager has one fewer outside vendor to deal with. Cote also said the institutional focus came from demand, and she did not rule out a retail offering later.18

From one bank to a pattern

What looked like a regional bank reviving an old project now looks like the start of a sector-wide move. In August 2026, Citigroup said it would launch bitcoin custody later in the year through a new platform called Custody+. Clients would be able to hold bitcoin alongside stocks and bonds.31 Citi's custody business covers more than 100 markets and runs its own network in 62 of them.31 One report put Citi's assets under custody at about $24 trillion.33 Earlier in 2026, the executive leading the build-out described the goal as making bitcoin "bankable": bitcoin would go through the same reporting, tax and control systems as conventional securities, with possible cross-margining between them.34

Coverage of Citi lists U.S. Bank with BNY, State Street and Standard Chartered as banks building competing digital-asset offerings.32 Morgan Stanley is reportedly working on its own platform, while JPMorgan has said it will not custody crypto directly.33 Commentators agree that crypto-native custodians face more pressure as a result.39 Some expect lower fees as large banks compete.33

The reports also leave things out. Citi has not disclosed a launch date, fees, sub-custodians or client eligibility for its service.35 U.S. Bank has said little in public about how much its early access program has taken in. So the claim that banks are taking business from crypto specialists remains a forecast. Market share data has not yet confirmed it. U.S. Bank's reliance on NYDIG as sub-custodian also shows that banks often still depend on crypto-native firms for the technical work, even as they take over the client relationship.12

ETF flows: the demand signal is noisier than in 2025

The ETF market that drove the relaunch is less steady now. When U.S. Bank made its announcement, ETF bitcoin holdings were worth more than $144 billion.18 In mid-October 2026, one tracker put total net assets across U.S. spot bitcoin ETFs at about $105 billion, with cumulative net inflows of $56.9 billion since January 2024.1 Another dataset put assets at $111.09 billion as of October 8.2 Either way, bitcoin itself was still roughly 32% below its October 2025 peak.4

The path in between has been rough. Cumulative flows reportedly reached a low of -$5.76 billion in July 2026, then recovered strongly in August and September.2 September brought about $2.65 billion in net inflows.2 October has been shakier. Funds lost $484.9 million on October 7, the largest single-day outflow since late June.2 Another $261.5 million left on October 14.1 October 15 brought a small net inflow of about $5 million.5 One weekly tally put bitcoin ETF outflows at $678.9 million for the week of October 5–9.9

Analysts disagree about what the flows mean. One argument is that inflows depend heavily on hedge fund basis trades and "debasement" positioning. Under that view, much of the money is tactical rather than long-term. Professional investors held just 20.8% of spot ETF assets in the first quarter of 2026, while financial advisors held 58%.4 Others see October's swings as institutions getting more selective rather than leaving.8

Our reading is that custody demand depends less on daily flows than headlines suggest. A fund that holds bitcoin needs a custodian whether it gained or lost money that day. What matters for banks is the stock of assets and the number of funds, not net creations in a given week. Daily outflows matter for fee revenue at the margin, but they do not undo the business case U.S. Bank set out.

The regulatory stack is still being built

The custody shift sits within a broader set of rules. SAB 121's rescission, OCC Interpretive Letter 1184 and joint FDIC–Federal Reserve safekeeping guidance now form the basis for bank custody. The GENIUS Act adds a federal framework for payment stablecoins.23 OCC Letter 1184 confirms that national banks can provide crypto custody and execution and can outsource them, provided they manage third-party risk.23 That outsourcing permission is what makes arrangements like U.S. Bank's with NYDIG workable.

Some questions remain open. One analysis notes that U.S. investment advisers must still use a recognized qualified custodian, and that an SEC custody proposal from October 2026 is not yet law.28 Much of the current bank framework rests on staff guidance and interpretive letters rather than formal rules.28 A future administration could revise that kind of guidance more easily than a statute.

The takeaway

U.S. Bank's relaunch shows a central dynamic of crypto market regulation in this period: a single accounting bulletin kept banks out, and its rescission let them back in. The bank had the product ready, its ETF clients wanted it, and once the capital penalty was gone, it moved. Since then, larger rivals have followed the same path. As a result, competition in crypto custody is moving from crypto-native firms toward the banks that already administer the funds. Volatile ETF flows will affect how quickly that happens, but probably not whether it does.