Traditional Finance Embraces Digital Assets
In a landmark move, a major traditional bank has officially launched cryptocurrency custody services, marking a significant shift in institutional acceptance of digital assets. This development comes after the Office of the Comptroller of the Currency (OCC) issued Bulletin 2025-17 on July 14, explicitly clarifying that federally chartered banks can provide crypto-asset safekeeping services. The bank's entry into this $3.2 trillion market signals growing confidence in blockchain technology's long-term viability.
Regulatory Landscape Shifts
The regulatory environment has evolved rapidly in 2025. In February, the SEC rescinded Staff Accounting Bulletin 121, which previously made it impractical for banks to custody digital assets by requiring them to record holdings as liabilities. FDIC Acting Chairman Travis Hill acknowledged in February that the agency is "actively reevaluating our supervisory approach," creating clearer pathways for banks. Nebraska and Wyoming have also established specialized digital asset banking frameworks, while 25 states have adopted updated Uniform Commercial Code provisions for digital assets.
Institutional Adoption Accelerates
Bank of New York Mellon pioneered institutional crypto custody in late 2024, followed by State Street and Citi Bank in early 2025. These services allow clients to securely store Bitcoin, Ethereum, and other digital assets using institutional-grade security protocols including multi-signature wallets, hardware security modules, and geographically distributed cold storage. According to recent Spencer Fane analysis, custody solutions reduce counterparty risk by 68% compared to exchanges.
How Crypto Custody Works
Bank custody services operate through a combination of blockchain technology and traditional financial safeguards:
- Clients transfer digital assets to designated wallet addresses
- Assets are held in segregated accounts separate from bank funds
- Multi-party computation requires multiple authorized signatures for transactions
- Regular third-party audits verify asset backing
- Insurance coverage protects against theft or loss
Market Impact
The entry of traditional banks addresses a critical infrastructure gap. Previously, only specialized firms like Coinbase Custody and Anchorage Digital offered institutional solutions. Banking involvement could unlock approximately $150 billion in institutional capital currently sidelined due to custody concerns. JPMorgan analysts project crypto custody could generate $8-12 billion in annual revenue for banks by 2028.
Challenges and Considerations
Despite progress, significant hurdles remain:
- BSA/AML compliance requires sophisticated transaction monitoring
- Valuation methodologies for illiquid tokens
- Cross-border regulatory discrepancies
- Smart contract risk management
- Energy consumption concerns (PoW networks)
Anchorage Digital Bank's 2022 consent order over BSA violations highlights ongoing compliance challenges. Banks are addressing these through Chainalysis integration and AI-powered suspicious activity detection.
Customer Benefits
For accredited investors and institutions, bank custody provides:
- FDIC insurance on dollar equivalents (not crypto)
- Integration with existing brokerage accounts
- Estate planning services for digital assets
- Staking rewards for proof-of-stake tokens
- Tax reporting integration
The Road Ahead
Industry experts anticipate rapid service expansion:
"What we're seeing is just phase one," says Kirstin Kanski of Spencer Fane LLP. "Expect collateralized lending against crypto holdings and ETF administration services by Q4 2025."
The OCC continues to evaluate additional crypto banking activities, including node operation and stablecoin reserves. As regulatory clarity improves, traditional finance's embrace of blockchain technology appears irreversible, fundamentally reshaping digital asset markets.