State Street, Citi Prepare for Crypto Custody as Institutional Appetite Grows

Key Takeaways

• Citi and State Street, two of the world’s largest custodian banks, are entering the crypto custody business.
• State Street is the second-largest custodian globally, while Citi ranks fourth.
• The move follows the repeal of SAB 121, a rule that had restricted banks from offering crypto custody services.

The race to dominate crypto custody is heating up on Wall Street, with financial giants rushing to offer services that were once off-limits. The latest to make their move are State Street and Citi, two of the world’s largest custodian banks.

State Street, which manages $46.6 trillion in assets, and Citi, with $25 trillion under custody, have both announced plans to establish crypto custody businesses.

Their entry marks a significant shift in the industry, following years of regulatory roadblocks that kept major financial institutions on the sidelines.

Citi and State Street’s Crypto Custody Plans

According to a report by The Information, State Street aims to launch its crypto custody services by 2026.

The firm has dabbled in digital assets before, launching a dedicated digital assets division in 2021 and briefly partnering with U.K.-based Copper for custody technology. However, regulatory uncertainty forced the firm to shelve its plans in 2023.

Citi, meanwhile, has been testing the waters with blockchain-based initiatives.

The bank previously partnered with Singaporean startup BondbloX for tokenized bond custody and explored digital asset custody with Metaco, a firm later acquired by Ripple.

Citi’s crypto strategy has remained relatively quiet compared to its peers, but its latest push suggests a renewed focus on the sector.

SAB 121 Repeal Clears the Path for Banks

Wall Street’s crypto pivot can largely be attributed to the recent repeal of SAB 121, an SEC rule that restricted banks from providing crypto custody services.

Introduced in 2022, SAB 121 effectively locked out traditional banks from the crypto custody business, favoring select firms like BNY Mellon, which became the first major bank to receive an exception. Critics argued the rule stifled innovation and gave regulators undue control over the market.

However, with the Trump administration rolling back SAB 121, banks are now free to engage in crypto custody, opening the door for giants like Citi and State Street to establish a presence in the sector.

A Pro-Crypto Shift on Wall Street

For years, banks approached crypto with caution, wary of regulatory scrutiny and reputational risks. But the lifting of restrictions, coupled with growing institutional demand for secure digital asset custody, has shifted the narrative.

With a pro-crypto president in office and regulatory barriers falling, Wall Street’s biggest players are no longer sitting on the sidelines—they’re moving in.