- State Street and Citi, top-tier global custodians, aim to establish a presence in the crypto custody market.
- State Street’s $46.6 trillion and Citi’s $25 trillion in assets under custody highlight the scale of their potential market impact.
- Regulatory shifts, such as the rescission of SAB 121, now allow banks to re-enter the digital asset custody space.
State Street, the globe’s second-largest custodian bank holding $46.6 trillion worth of assets under its custody, is tactically debuting its crypto custodianship business in 2025. The bank has not only continued exploring the space after being faced by regulatory hurdles previously,
After launching State Street Digital in 2021, the company initially partnered with UK-based Copper for custody technology. However, setbacks like introducing SEC’s SAB 121 in 2022 slowed their progress.
SAB 121 placed restrictions upon U.S. banks when handling digital assets, resulting in many players such as State Street halting activities in the arena. New breakthroughs such as the rescission of SAB 121 have opened the door for the banking sector to resume its activities in the arena.
To capitalize upon the rejuvenated opportunity, State Street partnered mid-year 2024 and appointed a new head for its digital assets to drive its expansion.
Citi’s Strategic Crypto Moves
Citi, the fourth-largest global custodian bank holding $25 trillion under custody, is also ramping up its activities around digital assets. Unlike the situation for State Street, however, the history of the bank’s activities around digital assets is many years old.
Notably, the bank also partnered with Singaporean firm BondbloX for fractional investment in bonds and rolled out its Citi Integrated Digital Assets Platform (CIDAP) during the year 2023.
Citi partnered with Metaco for its custody tech during the year 2022, the partnership being short-lived after the buyout by Ripple of Metaco. In spite of reports suggesting, that its growing list of experiments around blockchains and tokenized deposits is reflective of its commitment towards innovations around digital assets.
Regulatory Barriers and Breakthroughs
Both banks were severely constrained by SAB 121, limiting their ability for providing digital asset custody for nearly three years. The exception by the SEC gave the tipping point, and the custodians could now venture into this growing market.
The launch of the Bitcoin ETFs during the beginning of 2024 also increased the need for institutional-grade crypto custody, triggering the race for the main players.
State Street and Citi’s moves into the market for the custody of cryptocurrencies track the trend for the traditional banking sector. In the prior year, the largest custodian business, BNY Mellon, became the very first bank to secure an exception under SAB 121, setting the trend for the others.
Northern Trust and Standard Chartered were also proactive, showcasing the increased convergence of the banking sector towards digital asset innovation.
