The financial landscape on Wall Street is undergoing a quiet but profound transformation. Once cautious about digital assets, major U.S. banks—including BNY Mellon, State Street, and Citigroup—are now actively building infrastructure to support cryptocurrency services for institutional clients. Fueled by shifting regulatory winds and growing demand from asset managers, hedge funds, and wealth advisors, these institutions are laying the groundwork to become key players in the $3.2 trillion crypto ecosystem.
This strategic pivot marks a potential rebalancing of power between traditional finance and crypto-native firms. As banks enter the space, they bring credibility, compliance frameworks, and vast client networks—assets that could accelerate mainstream adoption of digital currencies and tokenized assets.
The Rise of Institutional Crypto Custody
At the heart of this movement is crypto custody—the secure storage of digital assets on behalf of clients. While not visible to end users, custody is a foundational service that enables further financial activities like trading, lending, and asset management.
Historically, crypto custody has been dominated by specialized firms such as Coinbase, Anchorage Digital, and BitGo. However, banks are now stepping in with plans to offer regulated, bank-grade custody solutions.
👉 Discover how financial institutions are securing the future of digital assets.
BNY Mellon, one of the world’s largest custodians for stocks and bonds, has already launched limited custody services for Bitcoin and Ethereum. The bank plans to expand its offerings to include additional tokens and is exploring custody solutions for exchange-traded funds (ETFs) that hold crypto. Currently, Coinbase dominates this niche, serving giants like BlackRock and Franklin Templeton in their Bitcoin ETF operations.
Caroline Butler, Global Head of Digital Assets at BNY Mellon, emphasized a measured approach: “We’re seeing increasing interest from endowments, wealth managers, and registered investment advisors who want to hold crypto with a trusted bank.” She added that custody also opens doors to tokenization, such as placing money market funds on blockchain networks.
Similarly, State Street aims to roll out digital asset custody by 2026, pending regulatory approval. Donna Morrogh, Chief Product Officer, outlined a broader vision: offering not just custody but transfer agency services—tracking ownership—and even helping clients use tokenized assets as collateral.
“This creates momentum for all related services,” Morrogh said. “We’re building a full-stack offering for tokenized securities.”
Regulatory Shifts Unlocking Bank Participation
For years, banks hesitated to engage directly with cryptocurrencies due to regulatory uncertainty and perceived risks. That changed rapidly under the new U.S. administration.
In early 2025, the Securities and Exchange Commission (SEC) rescinded previous accounting guidance from the Biden era that had made holding crypto prohibitively expensive for banks. Simultaneously, federal banking regulators—including the Federal Deposit Insurance Corporation (FDIC)—began revising their stance, moving from caution to active facilitation of bank involvement in digital assets.
These policy shifts have cleared critical hurdles. Now, banks can explore crypto services without fear of disproportionate compliance burdens or capital charges.
Citigroup Joins the Charge
Citigroup, the third-largest bank in the U.S. by assets, is actively exploring multiple pathways into crypto. According to sources familiar with its strategy, Citi is evaluating both in-house development and partnerships with external platforms.
A spokesperson confirmed: “Citi recognizes the accelerating adoption of digital assets among institutional clients. We are working with them to develop capabilities in asset tokenization and digital asset custody.”
While details remain under wraps, Citi’s entry signals growing confidence across Wall Street that digital assets are no longer a fringe experiment—but a core component of future financial infrastructure.
Beyond Custody: The Road to Crypto Trading and Lending
Custody is just the first step. Once banks establish secure custody frameworks, they can expand into higher-value services:
- Crypto trading desks for spot and derivatives markets
- Lending against crypto collateral
- Prime brokerage for hedge funds active in digital assets
Goldman Sachs made headlines in 2021 by launching a crypto trading division—but it still does not trade crypto directly. Instead, it focuses on cash-settled derivatives and futures listed on CME. Similarly, Citigroup trades Bitcoin futures only as an agent, without using its own balance sheet.
Direct spot trading would represent a significant leap—one that comes with greater regulatory scrutiny and capital requirements.
👉 See how next-generation financial platforms are bridging traditional and digital finance.
Two sources familiar with Goldman’s plans noted that the bank would need approval from the Federal Reserve and a BitLicense from the New York Department of Financial Services before launching full crypto trading. A commercial assessment is also underway to determine whether the business case justifies the investment.
“Just because you can do something doesn’t mean you will,” said one insider. “Volatility makes it expensive to meet capital rules. Banks must decide if this is the best use of resources.”
Tokenization: The Next Frontier
Beyond Bitcoin and Ethereum, banks are eyeing asset tokenization—the process of converting real-world assets like bonds, equities, or fund shares into blockchain-based tokens.
BNY Mellon and State Street both see custody as a springboard into this space. For example, a tokenized money market fund could settle instantly across borders, reduce counterparty risk, and enable 24/7 trading.
State Street’s roadmap includes supporting clients who issue tokenized assets, managing ownership records, and facilitating collateral management—all services that mirror traditional capital markets but operate on decentralized ledgers.
Can Crypto Firms Compete?
As banks advance, crypto-native companies are adapting. Coinbase recently urged U.S. regulators to allow banks to partner with crypto firms when launching custody and trading services—effectively positioning itself as a backend infrastructure provider.
Brett Tejpaul, Head of Coinbase Institutional, revealed he was holding back-to-back meetings with 10 major U.S. banks: “Collaboration will be key. Many banks will want proven technology and compliance tools we’ve built over years.”
This suggests a future where banks provide client trust and distribution while relying on crypto experts for execution—a hybrid model that could benefit both sides.
Frequently Asked Questions (FAQ)
Q: Why are banks entering crypto now?
A: Regulatory changes in 2025 reduced compliance costs and risks, while rising demand from institutional investors pushed banks to act.
Q: Are banks actually holding crypto?
A: Some, like BNY Mellon, already do—for Bitcoin and Ethereum—and plan to expand. Others are preparing but await final approvals.
Q: Will banks replace crypto exchanges?
A: Not immediately. Banks may dominate custody for traditional finance clients, but exchanges still lead in liquidity and innovation.
Q: What is asset tokenization?
A: It’s converting real-world assets (like bonds or funds) into digital tokens on a blockchain for faster settlement and broader access.
Q: Can individuals use bank crypto services?
A: Initially, these services target institutional clients—hedge funds, asset managers, endowments—not retail investors.
Q: Is direct crypto trading likely soon?
A: Possible, but not imminent. Banks face strict capital rules and must prove the business case before launching spot trading.
With custody as their beachhead, Wall Street banks are methodically expanding into digital assets. While progress may be gradual, their long-term goal is clear: to integrate crypto into the core of global finance.
👉 Explore the evolving role of financial institutions in the digital asset revolution.