Demand from institutional investors for bitcoin is increasing.
CNBC was the first to reveal that U.S. Bank’s bitcoin custody service is now available to fund managers.
According to Gunjan Kedia, vice chair of the bank’s wealth management and investment services business, the product will allow investment managers store private keys for bitcoin, bitcoin cash, and litecoin. Kedia expects future support for ethereum and other coins.
This is the latest hint that traditional financial institutions are accepting cryptocurrency as real assets. Custody institutions such as Bank of New York Mellon, State Street, and Northern Trust have all declared ambitions to custody digital assets.
“Our clients are serious about cryptocurrencies as a diversified asset class,” Kedia said. It’s unlikely that any asset manager isn’t considering it right now.
According to the Federal Deposit Insurance Corp., U.S. Bank, founded in 1863, is a top 10 player in custody with over $8.6 trillion in assets under custody and administration.
After a top regulator published a paper last year allowing national banks to hold crypto assets, Kedia polled its biggest clients to gauge their interest. Clients wanted the bank to move quickly, she discovered.
“While every currency may not survive – there may not be enough capacity for thousands of coins—there is something about the potential of this asset class and the underlying technology that warrants our support,” she said.
Some clients already own bitcoin, while others are awaiting custodial services, she said. Kedia claims U.S. Bank is one of the first to offer live custody.
BTC has risen to an all-time high of almost $64,000 in April before plummeting by half the following month. But the original coin has proven resilient: it has re-entered $50,000 territory after China banned it this month.
While bitcoin designed to cut away financial middlemen, large portions of the old financial order are being reconstruct to accommodate digital currency. After all, fund managers can keep their crypto keys. But managers want the endorsement of renowned names like U.S. Bank to reassure clients, Kedia added.
To accept a manager into the crypto product, U.S. Bank must perform anti-money laundering and “Know Your Client” checks, she added.
The product is only available to institutional managers with private funds in the US or Cayman Islands. Demand projected to surge if the SEC approves a bitcoin ETF.
“Many funds want to invest in ETFs,” Kedia remarked. The day the SEC approves an ETF, some want custody arrangements inked.