Bank of America (USB.US) Resumes Cryptocurrency Custody Business After Regulators Gave Green Light

The Zhitong Finance App learned that the United Bank of America (USB.US) is relaunching cryptocurrency escrow services for institutional investment managers, becoming one of the first banks to enter this increasingly competitive field.

The fifth-largest commercial bank in the US first launched cryptocurrency escrow services in 2021 in partnership with fintech firm NYDIG, but the bank suspended these plans after the US Securities and Exchange Commission issued guidelines requiring custodians to hold capital in their balance sheets for such activities.

However, shortly after Donald Trump began his second term this year, the US Securities and Exchange Commission repealed the rule.

Since then, the Minneapolis-based bank has been working with NYDIG to relaunch the service. Stephen Philipson, head of the wealth, corporate, commercial and institutional banking division of the United States Bank of America, said in an interview that the bank will now provide Bitcoin escrow services, starting with some traditional registered funds and exchange-traded fund (ETF) providers involved in Bitcoin.

The digital asset escrow sector has long been dominated by companies with cryptocurrencies as the core of their business, but under the leadership of the new US administration, US regulators are expected to update guidelines to encourage large enterprises to increase related business. In March of this year, the US Monetary Supervisory Service stated that banks can participate in digital asset activities, including providing custodian services, without prior approval.

Major financial institutions such as Bank of New York Mellon (BK.US) and Fidelity Investments all provide digital asset custody services. They compete with cryptocurrency companies such as Coinbase (COIN.US), BitGo Holdings Inc. and Anchorage Digital, which is the only cryptocurrency custodian with a Federal Trust Bank license.

Philipson said, “We already have a plan; now we're just starting to implement it again. As we assess market needs and the market continues to evolve, we are likely to scale up further.” He also said the bank is also exploring ways to integrate cryptocurrency and stablecoin use cases with the wealth management, payments, and consumer banking sectors.

A spokesperson said that United Bank of America will consider providing cryptocurrency custodian services other than Bitcoin if the standards are met.