Crypto Custody Becomes Land Grab for FinTechs

In traditional finance, custody is almost invisible.

A custodian bank can hold trillions of dollars in securities, ensuring that ownership records are accurate and assets can’t be misappropriated. These institutions are regulated, insured and audited.

Cryptocurrency custody has traditionally operated in a different universe.

Across the blockchain, possession of digital assets means controlling a private key, or a long, unique string of numbers that allows its holder to move assets recorded on the blockchain. Lose that key, and you lose the asset. No one can restore it; there’s no forgot-password button to click on blockchain networks.

For individual users, this is empowering but perilous. For institutions managing billions of dollars, it can be a governance nightmare.

As crypto firms are welcomed more and more into the financial mainstream, with regulations in the United States opening the door, the question of who holds the keys has kicked off an arms race for charters and trust. Once the domain of traditional financial institutions, this scramble for federal and state trust charters now spans crypto exchanges, stablecoin issuers and payments companies seeking to prove they can meet institutional standards.

Even legacy technology firms are entering the field. IBM announced Monday (Oct. 27) that it plans to launch a platform designed to provide custody and transaction services for institutional clients by the end of 2025.

Taken together, these marketplace movements signal that crypto custody is increasingly being normalized and not marginalized, no matter the industry’s allegations of “debanking.”

Read also: Custody Remains Missing Link in Crypto’s Mainstream Breakthrough

Blockchain technology is not a single invention but two distinct ones. The first is the data structure, blockchain’s immutable ledger of transactions, where each block of data is cryptographically linked to the one before it. The second, and arguably more important across the financial mainstream, is the trust model, or rather the removal of the need for one.

Before blockchain, the act of trusting in the digital world always relied on intermediaries. Banks verified balances, governments issued currency and auditors reconciled ledgers. Blockchain inverted that logic. By distributing identical copies of a ledger across thousands of computers, it eliminated the need for a single trusted recordkeeper. Instead, trust became an emergent property of the system itself, enforced by consensus, transparency and computation.

That new trust paradigm spawned an entire industry. However, as the system grew from a few thousand hobbyists to a multitrillion-dollar market, it collided with the simple fact that the human and institutional world still needs custody. Digital assets may live on a blockchain, but corporations, institutions and governments must still decide who holds the keys.

The result to date of the crypto custody question has been a bifurcation of the crypto landscape. On one side are the self-custodians, or users and protocols that hold their own keys and trust the blockchain’s code. On the other are the custodial intermediaries, such as exchanges, wallet providers and regulated custodians, that reintroduce the very structures blockchain was designed to bypass. Ironically, many of the largest players in crypto, from Coinbase to Binance, now function as centralized custodians in all but name.

Many crypto-native custodians also operate under a hybrid model. Assets remain on-chain, but access is managed through institutional-grade key management, multiparty computation (MPC) and compliance frameworks. In essence, they provide a centralized layer of operational trust atop a decentralized foundation.

See also: 4 Questions CFOs Need to Ask as Wall Street Embraces Stablecoins

Over the past year, as the regulatory posture of the U.S. has softened, applications for national trust charters have accelerated, with some of the largest names in FinTech and crypto among the applicants. Firms with their own charters could offer integrated custody, payments and tokenization services without relying on third-party banks.

During the Federal Reserve’s Payments Innovation Conference Oct. 21, Fed Governor Christopher Waller advanced the notion of a “skinny” or “streamlined” master account, a form of access to the Fed’s settlement system tailored for nonbank payments firms, including stablecoin issuers.

Under this proposal, firms would gain direct access to Fed payment rails, subject to tighter conditions, including no discount-window borrowing, no interest on reserve balances, capped balances and restricted operational features. This access is limited to payment-centric activity, not full banking operations.

At the same time, stablecoin issuers like Circle Internet Group, Kraken, Bridge (Stripe), Ripple and more are racing for federal trust or bank charters under the Office of the Comptroller of the Currency.

A national trust charter allows companies to operate across state lines under a single regulatory regime, rather than maintaining dozens of separate licenses. Unlike full national bank charters, trust charters do not permit deposit-taking or lending, but they allow custody, fiduciary services and settlement, functions increasingly critical to digital asset businesses.

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