Ben Strack

<div id="highlights-block_61b24589b50c4" class="highlights">
 <ul>
 <li>The US Securities and Exchange Commission (SEC) denied WisdomTree’s spot bitcoin ETF in a Dec. 1 letter</li>
 <li>The ETF’s proposed custodian, US Bank, rolled out its crypto custody services for fund managers in October</li>
 </ul>
 
</div>



WisdomTree amended its application for an ETF that would invest directly in bitcoin after the US Securities and Exchange Commission (SEC) rejected its proposal for such a product last week.



“The trust is not registered under the Investment Company Act of 1940, as amended,” according to <a href="https://www.sec.gov/Archives/edgar/data/1850391/000119312521350924/d122075ds1a.htm" target="_blank" rel="noreferrer noopener">a Dec. 8 filing</a>. “However, the sponsor is applying certain of the substantive requirements of the 1940 Act to the operations, infrastructure and oversight of the Trust [in] order to provide investors with some of the significant protections of the 1940 Act.”



As part of the changes, the WisdomTree Bitcoin Trust would use US Bank as a qualified custodian, the SEC disclosure indicates.



<a href="https://cms.blockworks.co/banking-giant-launches-custody-services-for-bitcoin/" target="_blank" rel="noreferrer noopener">US Bank rolled out</a> its crypto custody services for fund managers in October. A company announcement noted at the time that the custody services are intended for institutional investment managers with private funds in the US or Cayman Islands who would like to secure their bitcoin.



Bitcoin-focused financial services company NYDIG was also named the first crypto sub-custodian announced in US Bank’s network of providers.



US Bank had announced in April that it would administer NYDIG’s planned bitcoin ETF this year, pending regulatory approvals. That same month, US Bank participated in <a href="https://cms.blockworks.co/state-street-u-s-bank-in-on-30m-securrency-raise/" target="_blank" rel="noreferrer noopener">a funding round</a> for blockchain-based financial and regulatory technology firm Securrency.



US Bank Wealth Management and Investment Services had about $8.6 trillion in assets under custody and administration and $282 billion in assets under management, as of June 30.



A spokesperson for the company did not immediately return Blockworks’ request for comment.



Though not technically a bank, Fidelity also offers custody services for bitcoin ETFs, noted Sumit Roy, crypto editor and analyst at <a href="https://www.etf.com" target="_blank" rel="noreferrer noopener">ETF.com</a>.&nbsp;



“That said, it is much more common to see a firm like Coinbase act as a custodian, and that&#8217;s for good reason,” he told Blockworks. “They have been providing crypto custody services for a long time, and they have a great reputation.”



Also, under the 1940 Act, the WisdomTree Bitcoin Trust will provide daily disclosures required for ETFs, such as its portfolio holdings, net asset value per share, market price and any premium or discount as well as its media bid-ask spread, according to the amended filing. The trust’s financial statements will be audited at least annually by an independent registered public accounting firm and WisdomTree will comply with financial record keeping and reporting requirements under the Sarbanes-Oxley Act of 2002.



A WisdomTree spokesperson for the fund group declined to comment beyond the filing.



<h3 class="wp-block-heading">Still no spot bitcoin ETF in US</h3>



SEC Chairman Gary Gensler said during a virtual forum in August that the agency would prefer ETFs filed under the Investment Company Act of 1940 that were limited to bitcoin futures contracts. ProShares launched the US’s first futures-based ETF in October and a couple of issuers have brought to market similar offerings.&nbsp;&nbsp;



The amended application comes after the SEC wrote <a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf">a le</a><a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf" target="_blank" rel="noreferrer noopener">t</a><a href="https://www.sec.gov/rules/sro/cboebzx/2021/34-93700.pdf">ter on Dec. 1</a> denying WisdomTree’s proposed spot bitcoin ETF intended for the US market.&nbsp;



Similar to the SEC’s <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">rejection of VanEck’s planned bitcoin ETF</a>, the SEC notes that the Cboe BZX Exchange, on which the ETF’s shares would trade, did not meet certain requirements of the Securities Exchange Act of 1934. A section of the law requires a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and to protect investors.



The rejection of VanEck’s proposed product led to many <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">industry professionals saying</a> they do not expect the SEC to allow a spot bitcoin ETF to hit the US market until the second half of 2022, at the earliest.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I don&#8217;t think this is going to necessarily move the needle in terms of the SEC approving a spot bitcoin ETF,” Roy said of WisdomTree’s amendments.</blockquote>



WisdomTree manages roughly $75 billion assets, globally. The firm has spot bitcoin and Ethereum ETFs trading in Europe <a href="https://cms.blockworks.co/wisdomtree-launches-spot-etps-in-europe/" target="_blank" rel="noreferrer noopener">and added</a> several physically backed cryptocurrency basket exchange-traded products in the region last month.



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WisdomTree Amends Bitcoin ETF Application

<div id="highlights-block_615c81996aece" class="highlights">
 <ul>
 <li>Bitcoin currently has the greatest client demand, according to US Bank Strategy Chief Christine Waldron, though the company will evaluate offering custody for additional coins in the future</li>
 <li>US Bank previously announced that it would administer NYDIG’s bitcoin ETF and participated in a funding round for crypto firm Securrency</li>
 </ul>
 
</div>



US Bank rolled out its crypto custody services for fund managers on Tuesday, as one of the country’s largest banks doubles down on its commitment to the space.



The custody services are intended for institutional investment managers with private funds in the US or Cayman Islands who would like to secure their bitcoin, according to the company. The Minneapolis-based bank has selected <a href="https://nydig.com" target="_blank" rel="noreferrer noopener">NYDIG</a> as the first crypto sub-custodian announced in its network of providers.



US Bank Wealth Management and Investment Services had about $8.6 trillion in assets under custody and administration and $282 billion in assets under management, as of June 30.



The company’s investment management clients have studied investor demand and are working to accommodate their own clients’ interest in cryptocurrency, Christine Waldron, the bank’s chief global strategy officer, said in an email.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Bitcoin is the coin that we are seeing the greatest client demand for today,” she explained. “We will continue to evaluate additional coins from both a client demand and a risk perspective, and will add coins once and if they satisfy our stringent risk standards.”</blockquote>



NYDIG provides bitcoin technology and financial services solutions to banks, insurers, corporations and institutions. <a href="https://cms.blockworks.co/nydig-and-fiserv-team-up-to-put-bitcoin-in-consumers-bank-accounts/" target="_blank" rel="noreferrer noopener">NYDIG and Fiserv</a> revealed in June they were teaming up to help consumers get bitcoin into their bank accounts. Later that month, the National Cash Register (NCR) and <a href="https://cms.blockworks.co/nydig-and-ncr-bringing-bitcoin-to-the-people/" target="_blank" rel="noreferrer noopener">NYDIG partnered</a> to help US banks offer bitcoin to clients.



“NYDIG is excited to partner with US Bank to provide its customers with a custody solution that meets the highest security, compliance and regulatory standards,” Robert Gutmann, the firm’s CEO, said in a statement.



US Bank has been developing its blockchain initiatives since 2015 as it “saw this trend coming,” Waldron <a href="https://cms.blockworks.co/u-s-bank-launches-crypto-custody-with-nydig/" target="_blank" rel="noreferrer noopener">previously told Blockworks</a>.&nbsp;&nbsp;



The company had announced in April that it would administer NYDIG’s bitcoin ETF this year, pending regulatory approvals. That same month, US Bank participated in <a href="https://cms.blockworks.co/state-street-u-s-bank-in-on-30m-securrency-raise/" target="_blank" rel="noreferrer noopener">a funding round</a> for blockchain-based financial and regulatory technology firm Securrency.



<h3 class="wp-block-heading">Testing the waters</h3>



Large traditional banks continue to dip their toes into the crypto realm.&nbsp;BNY Mellon, the world’s largest custodian bank, <a href="https://cms.blockworks.co/bny-mellon-offer-bitcoin-custody-this-year/" target="_blank" rel="noreferrer noopener">revealed plans</a> earlier this year to eventually treat digital assets like clients’ more traditional holdings by using a new platform that was in the prototype phase.&nbsp;



Rival bank State Street <a href="https://cms.blockworks.co/state-street-launches-digital-finance-unit-for-crypto/" target="_blank" rel="noreferrer noopener">created a new division</a> focused on the shift to digital finance in June. It later <a href="https://cms.blockworks.co/state-street-teams-with-lukka-to-expand-crypto-services/" target="_blank" rel="noreferrer noopener">partnered</a> with crypto asset data and software provider Lukka to help it provide digital and cryptocurrency asset fund administration capabilities for its private funds clients.



Most recently, Bank of America officially launched its <a href="https://cms.blockworks.co/bank-of-america-launches-cryptocurrency-research-effort/" target="_blank" rel="noreferrer noopener">coverage of digital assets</a> on Monday. Candace Browning, the bank’s global head of research, had called cryptocurrencies and digital assets “one of the fastest growing emerging technology ecosystems” in an internal memo obtained by Blockworks.



US Bank’s custody offerings round out the list of services that cryptocurrency funds need, such as accounting, administration and investor services, Waldron noted.



“We are continuing to stay close to cryptocurrency to evaluate further offerings more broadly in the investment services space,” she said.



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Banking Giant US Bank Launches Custody Services for Bitcoin

Tanaya Macheel

<div id="highlights-block_60887c2371792" class="highlights">
 <ul>
 <li>U.S. Bank also said it will also administer NYDIG’s bitcoin exchange-traded fund this year, pending regulatory approvals</li>
 <li>U.S. Bank has been developing its “blockchain initiatives” since 2015</li>
 </ul>
 
</div>



U.S. Bank is rolling out a custody service for digital assets and will administer NYDIG’s bitcoin exchange traded fund this year pending regulatory approvals.&nbsp;



The fifth-largest <a href="https://www.usbank.com/about-us-bank.html" target="_blank" rel="noreferrer noopener">bank</a> in the US by assets is moving forward with its plans in an effort to meet increasing demand by pension funds, insurance companies and other institutional clients to invest in digital assets, Christine Waldron, U.S. Bank’s strategy chief, told Blockworks Tuesday.



It follows the <a href="https://cms.blockworks.co/bny-mellon-offer-bitcoin-custody-this-year/" target="_blank" rel="noreferrer noopener">Bank of New York Mellon</a> and <a href="https://cms.blockworks.co/state-street-lends-tech-to-institutional-crypto-trading-platform/" target="_blank" rel="noreferrer noopener">State Street</a>, both of which have made similar announcements in recent weeks.



&#8220;That&#8217;s the best part of this story: that you&#8217;re really seeing the institutions saying, ‘this is an asset class that is here to stay, and we need to now make sure we&#8217;re putting that appropriate rigor around it,’” Waldron said.



<h3 class="wp-block-heading">U.S. Bank saw the trend coming</h3>



U.S. Bank has been developing its “blockchain initiatives” since 2015, Waldron said. They include an RFP to expand its custody network to include cryptocurrency custodians, its ability to service digital asset funds like NYDIG (a longstanding client of the bank’s), and its <a href="https://cms.blockworks.co/state-street-u-s-bank-in-on-30m-securrency-raise/" target="_blank" rel="noreferrer noopener">investment in Securrency</a>, a financial technology firm focused on bringing crypto compliance tools to banks and financial institutions.



“We had the benefit of putting a lot of infrastructure in place early on to help our clients,” Waldron said. “We saw this trend coming, and we were in a really good position to help them meet the market needs and demand.&#8221;



Waldron said the bank has selected its sub-custodian for storing digital assets but has yet to reveal that partner as it finalizes risk management, compliance and operational integration processes.



U.S. Bank also said it will also administer NYDIG’s bitcoin exchange-traded fund this year, pending regulatory approvals. NYDIG, the digital asset subsidiary of Stone Ridge Asset Management, filed for a bitcoin ETF in February, joining Galaxy Digital, Fidelity, Van Eck, Grayscale and others <a href="https://cms.blockworks.co/fidelity-enters-the-bitcoin-etf-race/" target="_blank" rel="noreferrer noopener">vying for SEC approval for a bitcoin ETF</a>.



<h3 class="wp-block-heading">Have to hold</h3>



Waldron said that’s just the first U.S. Bank has been named in, but that it’s been working closely with “a few” other clients to file their S-1s (the Securities and Exchange Commission filing companies submit when planning to go public, to register their securities) establishing cryptocurrency ETFs.&nbsp;



“This product is going to come to market at some point here,” she said.



Despite U.S. Bank’s work dating back several years, Waldron said the landscape began to shift in October, when the US Office of the Comptroller of the Currency confirmed banks can hold stablecoin reserves as a service to bank customers.&nbsp;



“You saw huge institutional investor money flow starting to come in and then you really heard the rhetoric with all of these third-party investment managers saying ‘cryptocurrency is going to be one of these things we&#8217;re going to maybe want to add into our portfolio. It may not be our primary investment objective, it may not even be something we want to hold long-term, but it&#8217;s something we&#8217;re going to end up having to hold,’” Waldron said.