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Written by Cyndie Martini
on November 16, 2021

Trying to custody cryptocurrency using the current exchange platforms is fraught with issues. There are concerns about hacking, losing your keys, the exchange losing the keys, fraudulent behavior at the exchange, lack of customer service, and lack of regulatory oversight. While retail customers are ok dealing with these concerns, they are a no-go for institutional plays.

U.S. Bank is looking to change that perception, at least for its institutional clients. On Oct 5, U.S. Bank said it would begin providing bitcoin custody services to institutional clients. This is being made possible through integrations with FIS and a cryptocurrency custody provider called NYDIG.

FIS is a backend provider of banking services. It isn't a small player in the industry. FIS is a publicly held company (traded on the Nasdaq) that generated $12.5 billion in revenue for 2020. Its market cap is about $70 billion.

NYDIG has deals with Morgan Stanley to offer crypto custody to its wealthy clients. Goldman Sachs also provides crypto custody services.

These providers and more clarity on cryptocurrency regulations allow traditional banks to join the fintechs that have offered crypto services for a while. These include Square, Paypal, and Robinhood. We shouldn't be surprised to see regional, and community banks begin offering similar crypto services to their retail customers. Bank of New York Mellon, State Street, and Northern Trust have also announced plans to provide crypto custody services.

Banking crypto custody services will open crypto up to more people. Managing fiat and crypto at any current exchange isn't a pleasant experience since they lack customer service and are prone to the issues mentioned above. However, that's currently the only way to trade cryptocurrencies. Customers will have more confidence in crypto services provided by their bank or credit union.

The irony here is that cryptocurrencies were created to bypass traditional finance and all of its regulations. But now, we see that traditional institutions are becoming heavily integrated into crypto and bringing their regulations with them.

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