George Frey | Bloomberg | Getty Images
The race to cater to institutional investors looking to bet on the cryptocurrency is heating up.
CNBC has learned that US Bank, the nation’s fifth-largest retail bank, may announce Tuesday that its cryptocurrency custody service is available to fund managers.
The offering will help investment managers store private keys for bitcoin, bitcoin cash and litecoin with the help of sub-custodian NYDIG. Gunjan Kedia, vice president of the bank’s wealth management and investment services division. Kedia said support for other coins like Ethereum is expected over time.
The move is the latest sign that established financial players are beginning to accept cryptocurrencies as a legitimate asset class. Within the realm of custody banks, which verify and secure trillions of dollars of traditional assets for money managers, all major players, including the Bank of New York Mellon, State Street and Northern Trust, have announced plans to maintain digital assets.
“Our clients are getting very serious about the potential of cryptocurrencies as a diversified asset class,” Kedia said in an interview. “I can’t believe there’s a single property manager who isn’t thinking about it right now.”
Gunjan Kedia, Vice President, Wealth Management and Investment Services Division of the bank.
credit: US Bank
US Bank, which was founded in 1863 during the Civil War, is the top ten player in custody with more than $8.6 trillion in assets under custody and administration, according to data from the Federal Deposit Insurance Corp.
issued by a major regulator paper After it was established last year that national banks could take custody of crypto assets, Kedia surveyed the firm’s biggest clients to determine whether their interest was genuine. He found that interest in crypto was widespread and not limited to niche players, and customers wanted banks to move quickly.
“What we were hearing across the board is that not every currency can survive – there may not be room for thousands of coins – there is something about the potential of this asset class and the underlying technology that stands out for us. It would be prudent to support for it,” she said.
Some investment clients already have positions in bitcoin, while others are waiting for custody services to begin, she said. Kedia said US Bank is one of the first institutions to offer a live custody product.
The price of bitcoin has soared this year, reaching an all-time high of nearly $64,000 in April and halving the following month. But the native cryptocurrency has proven resilient: It has faced China’s move to ban the digital currency last month, reaching $50,000 once again early Tuesday.
There is irony in the fact that while bitcoin was created to cut out financial middlemen, the old financial order is being rebuilt to cater to digital currencies. Eventually, fund managers can choose to store their own cryptocurrency keys. But managers want established names like US Bank to help address the concerns of their own customers, Kedia said.
To include a manager in the crypto product, a US bank would need to trace the origin of the customer’s funds in industry-standard anti-money laundering and “know your customer” checks, she said.
According to the bank, this product is only for institutional managers with private funds in the US or the Cayman Islands. But once the US Securities and Exchange Commission approves a bitcoin ETF, demand is expected to increase.
“We have a lot of funds which are looking to invest in ETFs,” Kedia said. “Some people really want the custody contract to be signed the day the SEC approves the ETF.”
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