As cryptocurrency integrates into mainstream finance, fintechs, nonbanks, and tech giants are competing for federal and state trust charters to handle custody services. This arms race highlights the shift from decentralized key control to regulated institutional standards. IBM's recent announcement underscores the growing normalization of crypto custody.
In traditional finance, custodian banks manage trillions of dollars in securities, ensuring accurate ownership records through regulation, insurance, and audits. Cryptocurrency custody differs markedly, relying on private keys for asset control; losing a key means permanent loss, with no recovery option, posing significant risks for institutions handling billions.
As U.S. regulations open doors for crypto firms, an arms race has emerged for federal and state trust charters among crypto exchanges, stablecoin issuers, and payments companies. These charters allow firms to demonstrate compliance and legitimacy, enabling integrated custody, payments, and tokenization without third-party banks.
Blockchain technology combines an immutable ledger with a trust model that eliminates intermediaries, distributing ledgers across networks for consensus-based verification. However, as the market reaches multitrillion-dollar scale, institutions require custodians, leading to a split between self-custodians trusting blockchain code and intermediaries like Coinbase and Binance acting as centralized custodians. Many use hybrid models, keeping assets on-chain while applying key management, multiparty computation, and compliance frameworks.
Over the past year, charter applications have surged amid softening regulations. At the Federal Reserve’s Payments Innovation Conference on October 21, Fed Governor Christopher Waller proposed a “skinny” master account for nonbanks, including stablecoin issuers, offering limited Fed access for payments without full banking features like discount-window borrowing or interest on reserves.
Stablecoin issuers such as Circle Internet Group, Kraken, Bridge (Stripe), and Ripple are seeking OCC charters. A national trust charter permits cross-state operations for custody, fiduciary services, and settlement, excluding deposit-taking or lending.
IBM announced on October 27 its plan to launch a custody and transaction platform for institutions by the end of 2025, signaling crypto custody's normalization despite industry challenges like debanking allegations.