US Bancorp Explores Stablecoins as Crypto Custody Business Flourishes
Interest in digital assets among major financial institutions continues to evolve. A significant development comes from US Bancorp, one of the largest banks in the United States, which is actively exploring the potential of stablecoins while seeing a resurgence in its cryptocurrency custody services.
US Bancorp’s Crypto Custody Revival
US Bancorp first launched its institutional crypto custody service in 2021. However, according to CEO Gunjan Kedia, the service faced significant headwinds under the previous regulatory climate. Kedia noted that the uncertain regulatory environment made large institutional investors hesitant to engage with crypto-related business offerings.
This situation appears to be changing. Kedia indicated that interest in the bank’s custody service has recently picked up. This revival coincides with a shift in the approach to crypto regulation at the federal level, which is seen as more favorable towards the industry compared to past enforcement actions.
Studying the Potential of Stablecoins
Beyond custody, US Bancorp is now focused on the broader implications of stablecoins. Kedia stated the bank is “studying and watching” the role it could play in the growing stablecoin ecosystem. The primary area of interest is payments, recognizing the potential efficiency stablecoins could offer.
The stablecoin market has grown substantially, with the market capitalization of the largest stablecoins exceeding $223 billion. This growth highlights the increasing relevance of these digital tokens pegged to stable assets like the US dollar.
Potential Roles in the Stablecoin Ecosystem
US Bancorp sees several ways it could participate with stablecoins. These include:
- Creating their own stablecoin, potentially through partnerships.
- Providing infrastructure services for stablecoin issuers.
- Holding the backing assets that give stablecoins their value.
- Offering related services such as escrow for stablecoin transactions.
Kedia mentioned that the bank is involved in various pilots to explore these possibilities, suggesting a hands-on approach to understanding the operational aspects.
Challenges and the Path Forward for Institutional Crypto
Despite the growing market cap and potential, Kedia pointed out that a large portion of stablecoin transaction volume currently occurs within the crypto ecosystem itself, primarily for crypto-to-crypto trading, rather than real-world payments. She estimated that around 90% of the volume falls into this category.
Addressing the lack of clear rules for issuers is crucial. The proposed GENIUS Act, which aims to provide a regulatory framework for stablecoins, is seen as a step towards bringing clarity. This legislation could help answer questions about how stablecoin offerings should be structured, potentially solidifying the role institutions like US Bancorp can play.
The bank acknowledges that there is still much to be determined regarding its exact position in the stablecoin space. However, the renewed interest in institutional crypto services and the active study of stablecoins signal a strategic focus on adapting to the evolving digital asset landscape.
Summary
US Bancorp is navigating the complex world of digital assets with renewed vigor. Its crypto custody business is experiencing a resurgence, driven by shifts in the regulatory environment. Concurrently, the bank is seriously evaluating the potential of stablecoins, exploring roles from infrastructure provision to potentially issuing its own. While challenges remain, particularly concerning real-world adoption and clear crypto regulation, the bank’s efforts highlight the increasing integration of traditional finance with the digital asset economy.
