Blockchain and Crypto, Member Exclusive

With traditional banks acting as custodians, is crypto’s decentralized nature under threat?

  • Over $200 billion worth of bitcoins have been lost so far. Do people need a better way to secure their digital assets?
  • “Not your keys, not your coins,” say crypto traditionalists, arguing the space is meant to be free of banks, with a fundamental ‘one’s own bank’ philosophy.
close

Email a Friend

With traditional banks acting as custodians, is crypto’s decentralized nature under threat?

As the world of cryptocurrencies is booming, everyone wants a piece for themselves. American brick-and-mortar banks are increasingly looking to offer crypto custodial accounts. While this may be seen as an encouraging development, it forces one to reflect on whether such institutional involvement contradicts the basic thesis of cryptocurrencies — with banks acting as custodians, is crypto’s decentralization under threat?

US Bank is the latest to offer crypto custodial accounts. The bank’s offering enables fund managers to store private keys for Bitcoin, Bitcoin Cash, and Litecoin, with assistance from sub-custodian NYDIG. The bank finds the asset class to be of increasing interest to its customers and believes it will continue to gain relevance in the future. 

Custodial accounts allow investors to store their crypto assets safely with a third-party service provider. These assets are generally distributed between hot and cold wallets. This allows some to be available for trading and transactions, while others securely sit and gain value. 

“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” said Gunjan Kedia, vice-chair of US Bank’s wealth management and investment services division. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”

Kedia also revealed that Ethereum compatibility can be expected soon.


This content is available exclusively to Tearsheet Outlier members.

Tearsheet Outlier information and signup Missing out? Subscribe today and you’ll receive unlimited access to all Tearsheet content, original research, exclusive webinars and events, member-only newsletters from Tearsheet editors and reporters and much more. Join Outlier now — only $49/mo. Already an Outlier member? Sign in to your account

0 comments on “With traditional banks acting as custodians, is crypto’s decentralized nature under threat?”

Member Exclusive, Payments

Payments Briefing: BNPL will soon play a much bigger role in credit scores

  • Credit bureaus in the US are working to implement standardized credit reporting plans on BNPL loans.
  • BNPL use may start to play a much bigger role in consumers’ credit ratings.
Ismail Umar | January 27, 2022
Data Snacks, Member Exclusive

Data Snack: SMBs want more embedded banking options

  • The global market for embedded financial services for SMBs is forecasted to be worth $124 billion by 2025.
  • 85% of SMBs were surveyed to be using embedded digital services in their day-to-day operations.
Subboh Jaffery | January 26, 2022
Member Exclusive

Lending Briefing: Could we see more BNPL consolidation this year?

  • Given the growth and interest in the space, companies have increasingly been looking to get a piece of the BNPL pie.
  • As fintechs mature in their niche markets, larger players might continue to see this as an opportunity and go for it.
Iulia Ciutina | January 26, 2022
Blockchain and Crypto, Member Exclusive

Bankchain Briefing: Highlights from CoinDesk’s Annual Crypto Review

  • This week, we take a look into CoinDesk’s recent Annual Crypto Review.
  • We also explore factors that would convince Americans to invest in cryptocurrencies, and whether they think crypto could replace fiat currency.
Ismail Umar | January 25, 2022
Member Exclusive, New banks

Banking Briefing — January 24, 2022

  • In this week's briefing, we've got Zopa converting to bankism, Current breaking the challenger bank mold, and banks shutting down branches.
  • The look and feel of banks is changing, but not always in the most predictable way.
Rivka Abramson | January 24, 2022
More Articles