The news: U.S. Bancorp has restarted its digital asset custody services for institutional clients after the Securities and Exchange Commission (SEC) rolled back a rule requiring financial institutions (FIs) to hold capital for cryptocurrency-related activities, per Bloomberg. It’s initially focusing on Bitcoin for investment funds and ETF providers.

Why it matters: This move, along with similar efforts by other major FIs, signals growing acceptance of digital assets within the traditional banking sector. Banks are no longer on the sidelines; they are actively seeking to participate in the digital asset economy.

For the crypto market, it could mean more institutional capital and new financial products.

Our take: This development isn’t surprising given recent pro-crypto regulatory changes.

A major FI like U.S. Bancorp diving back in shows there's a real business imperative too, driven by institutional demand. While crypto-native firms like Coinbase have dominated the custody space, the entry of banking giants will heighten competition in the market.

Crypto investments—especially without the capital buffers once required by the SEC—remain riskier than more traditional investments for both FIs and their customers. While custodying is less risky than holding assets on the balance sheet, it still exposes banks to regulatory and reputational challenges. Even so, these offerings give banks a way to tap younger investors who have been eager for alternative products.