The financial landscape is undergoing a profound transformation as traditional banking institutions increasingly collaborate with digital asset custodians and service providers. This shift marks a pivotal moment in the convergence of legacy finance and the burgeoning world of cryptocurrencies.
According to Grayscale Investments’ latest report, Reimagining the Future of Finance, the digital economy is defined as “the intersection of technology and finance increasingly shaped by digital spaces, experiences, and transactions.” In this context, it’s no surprise that banks are launching services enabling clients to access Bitcoin and other digital assets.
👉 Discover how traditional banks are integrating crypto solutions to meet evolving investor demands.
The Rise of Institutional Crypto Custody
In recent years, major financial institutions have moved swiftly to support crypto custody. In February 2021, BNY Mellon announced it would begin holding, transferring, and issuing Bitcoin and other cryptocurrencies on behalf of asset management clients. As of December 31, 2021, BNY Mellon held $46.7 trillion in assets under custody and $2.4 trillion in assets under management, according to Michael Demissie, Head of Digital Assets and Advanced Solutions at BNY Mellon.
This move set a precedent. By June 2021, BBVA began offering Bitcoin trading and custody services in Switzerland. Later that year, U.S. Bancorp — the fifth-largest retail bank in the United States — launched a cryptocurrency custody solution for institutional investors.
Alex Tapscott, Managing Director at Ninepoint Digital Asset Group, noted that since 2020, U.S. banks have been racing to enter the crypto custody space. “Crypto assets represent a $2 trillion asset class, and custody is a major business,” Tapscott said. He pointed to a key catalyst: the July 22, 2020, letter from the Office of the Comptroller of the Currency (OCC), which explicitly permitted federally chartered banks to provide cryptocurrency custody services. This regulatory clarity paved the way for widespread adoption in 2021 and beyond.
Strategic Partnerships: Bridging Two Financial Worlds
Rather than building infrastructure from scratch, many traditional banks are opting to partner with established crypto custodians and sub-custodians. These collaborations allow banks to offer digital asset services quickly and securely while leveraging existing expertise.
Ramine Bigdeliazari, Head of Product Management at Fidelity Digital Assets, explained that partnering with digital asset service providers is a natural next step for traditional institutions facing rising client demand.
“While banks can enter the digital asset market through building end-to-end solutions or acquiring providers, establishing sub-custody relationships with trusted firms offers a faster, more reliable path to market.”
Fidelity Digital Assets provides sub-custody services to banks and other institutional clients, enabling them to offer digital asset access through familiar interfaces — without needing to develop their own tech stack.
A prime example is NYDIG (New York Digital Investment Group), which partners with U.S. Bancorp to deliver Bitcoin custody solutions under its “Global Fund Services” platform. NYDIG has extended this model to over 35 banks and credit unions, according to Kelly Brewster, the company’s Chief Marketing Officer.
“NYDIG is helping bring Bitcoin to Main Street by empowering regional and community banks to offer crypto services,” Brewster said.
Tapscott emphasized that while sub-custodians reduce operational risk for banks, native crypto custodians like Gemini and Coinbase also play a vital role. He predicts white-label solutions will become popular — where banks brand crypto custody products powered by established platforms like Anchorage or BitGo.
👉 Learn how white-label crypto custody solutions are accelerating bank adoption.
Infrastructure Innovation Driving Adoption
Digital asset infrastructure providers are also instrumental in bridging traditional finance and crypto. Fireblocks, for instance, has partnered with BNY Mellon to support its digital asset custody platform. Stephen Richards, VP of Product Strategy and Business Solutions at Fireblocks, explained that BNY Mellon uses Fireblocks’ technology stack alongside internal systems to enable secure digital asset holdings.
Demissie confirmed that BNY Mellon is actively developing its own digital asset custody platform, supported by strategic investments — including a Series C investment in Fireblocks in March 2021.
“Our digital asset custody platform is currently in development and testing. We plan to launch it this year, pending regulatory approval.”
In the meantime, BNY Mellon already offers fund administration services for digital asset products — including those managed by Grayscale, the world’s largest digital asset manager — and supports 17 out of 18 active cryptocurrency funds in Canada.
Will Big Banks Undermine Crypto Decentralization?
As traditional institutions embrace crypto, concerns arise about whether this integration threatens the decentralized ethos of blockchain technology.
Demissie believes digital assets are here to stay: “Our clients expect us, as their trusted financial partner, to extend core services into this emerging asset class.” Yet some wonder if Wall Street’s involvement could dilute crypto’s original vision.
Tapscott argues that for most institutional and retail investors, custodial solutions are preferred — whether through native platforms like Gemini or traditional banks. “Your private keys are held by someone else either way,” he said. “But that doesn’t stop millions from being their own bank using hardware wallets.”
Anthony Woolley, Head of Business Development at Ownera, a digitized securities firm, added that regulation inherently requires centralized record-keeping — such as transfer agents for securities — making fully decentralized compliance difficult.
“Regulated digital securities can’t be entirely decentralized and still meet legal requirements.”
Still, Woolley envisions a future where tokenized securities enable peer-to-peer transactions with instant settlement — a form of practical decentralization that balances innovation with compliance.
Frequently Asked Questions
Q: Why are banks partnering with crypto custodians instead of building their own systems?
A: Building secure, compliant crypto infrastructure is complex and costly. Partnering allows banks to launch services faster while reducing technical and regulatory risk.
Q: What is sub-custody in crypto?
A: Sub-custody involves a bank using a specialized third-party provider (like Fireblocks or Fidelity) to securely store digital assets on behalf of its clients, while maintaining the client relationship.
Q: Are traditional banks now offering Bitcoin to retail customers?
A: While most services currently target institutions, partnerships with firms like NYDIG are enabling regional banks to offer Bitcoin access to everyday customers.
Q: Does bank involvement threaten crypto’s decentralization?
A: While custodial models centralize control of private keys, self-custody options remain available. Regulatory frameworks also necessitate some centralization for compliance.
Q: What role does regulation play in bank crypto adoption?
A: The 2020 OCC guidance was crucial — it clarified that federal banks can legally provide crypto custody, accelerating institutional participation.
Q: Will all major banks offer crypto services soon?
A: Demand is strong — 71% of Bitcoin holders say they’d switch their primary bank for one offering crypto services. Banks not adapting risk losing clients.
The Bottom Line: Collaboration Is Key
Despite valid concerns about centralization, the trend is clear: rising institutional demand for digital assets will drive deeper collaboration between traditional banks and crypto custodians.
Matt Zhang, former Citigroup trader and founder of Hivemind Capital Partners — a $1.5 billion multi-strategy fund focused on institutionalizing crypto — believes banks face high regulatory hurdles in developing new services. Crypto custody is among the most complex.
“Client demand exists. Banks must find ways to partner with sub-custodians to deliver services quickly — while planning for long-term internal development.”
Zhang notes that NYDIG’s Bitcoin + Banking survey revealed most users prefer accessing Bitcoin through their existing bank — one they trust for security and compliance. With 71% of Bitcoin holders willing to switch banks for better crypto offerings, the incentive is clear.
Ultimately, the most competitive institutions will be those offering vertically integrated services — combining trading, lending, custody, and banking — rather than isolated products.
👉 See how integrated financial platforms are shaping the future of digital asset banking.
The future of finance isn’t about choosing between traditional banking and decentralized crypto — it’s about synergy. By partnering with proven custodians and leveraging secure infrastructure, banks can meet evolving client needs while preserving trust, compliance, and innovation.
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