US Bank launches crypto custody service, accelerating institutional adoption


  • The fifth-largest bank in the United States has announced the launch of its crypto custody service for fund managers. 
  • Proponents state that institutional crypto adoption is at the low end of a curve that could accelerate the upside. 
  • Organizations like pension funds are the most likely to embrace cryptocurrencies. 

US Bank drives crypto adoption among institutional investors and fund managers with its latest service offering. Institutions in the United States currently have low exposure to cryptocurrencies owing to regulatory hurdles; this is likely to change with the launch of crypto custody services. 

Experts predict that institutional adoption in crypto will skyrocket

United States' fifth largest retail bank, US Bank, offers a Bitcoin custody service to fund managers. The offering entails storing private keys for Bitcoin (BTC), Bitcoin Cash (BCH) and Litecoin (LTC). 

Gunjan Kedia, Vice-Chair of US Bank's wealth management and investment services division, states that support for Ethereum and other cryptocurrencies will be added over time. 

Kedia states, 

Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class. I don't believe there's a single asset manager that isn't thinking about it right now.

There is a higher percentage of institutional investors interested in cryptocurrencies when compared to 2020. Proponents in the cryptocurrency ecosystem expected China's crypto ban to stifle institutional adoption and result in a drop in these numbers. 

Interestingly, Asia's cryptocurrency transaction volume has increased by over 700% since 2020. Despite the ban on cryptocurrencies in China, crypto adoption is on the rise. 

The top three Asian countries leading the wave of cryptocurrency adoption are India, Pakistan and Vietnam, utilizing peer-to-peer monetary systems. 

Chainalysis' 2021 Global Crypto Adoption Index (GCAI) evaluated 154 countries based on on-chain cryptocurrency value received, on-chain retail value transferred and peer-to-peer exchange trade volume. Chainalysis is a leading blockchain intelligence platform. The results are shown in the chart below.
 

Chainalysis' 2021 Global Crypto Adoption Index

Chainalysis' 2021 Global Crypto Adoption Index metrics.

US Bank is not the first financial or banking institution to launch crypto-related services in the United States. Key players in custody banking, Bank of New York Mellon, State Street and Northern Trust, have announced their plans to support custody of cryptocurrencies. 

US Bank's service is currently limited to institutional managers in the United States or the Cayman Islands. While cryptocurrencies were created to embrace decentralization, fund managers' clients are looking for custody from established banking and investment giants like US Bank. 

Katie Stockton, the founder and managing partner at Fairlead Strategies LLC, believes that cryptocurrency adoption is in its early stages. Stockton states, 

We're at the very low end of that curve that could accelerate to the upside.

Stockton believes that pension funds have not explored cryptocurrencies as an investment instrument yet and that allocating even a fraction of their assets could result in significant gains. This makes pension funds the ideal client for cryptocurrency fund managers and institutions. 

Charlie Silver, CEO of Permission.io, believes that cryptocurrency will become an asset class for institutions. Silver was quoted saying,

I have no doubt that crypto will become a true asset class on par with equities, bonds, real estate, and precious metals.

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