Custody banks occupy one of the stodgiest corners of Wall Street. The biggest — State Street, Northern Trust and Bank of New York Mellon — make money from fees charged for back-office services such as record keeping and trade clearing. Their entrance into the wild world of cryptocurrencies looks incongruous.

But the move is a rational reaction to demand. Institutional interest in cryptos has grown sharply over the past 18 months as low interest rates fuel continued demand for alternative assets. Despite a recent pullback, bitcoin prices are still up more than 250 per cent over the past 12 months.

Being boring is a selling point. Compared with their retail counterparts, institutional investors are more likely to turn to big household names and regulated entities for support services in cryptocurrencies — especially given the lack of clarity in the US over regulation of the $1.5tn market.

In December, Northern Trust teamed up with a division of Standard Chartered to launch a crypto custody business called Zodia. Two months later, BNY Mellon announced plans to roll out a new digital custody unit this year. State Street in April said that it would team up with start-up Pure Digital to create an institutional digital currency trading platform.

Fees generated from digital assets will not overtake those made from traditional assets soon. Coinbase, the bitcoin exchange that went public this year, is the world’s largest crypto custodian with $223bn in assets under custody. It made just $10.4m from custodial fees last year, compared with $1.1bn in revenue generated by trading. Competition adds pressure. Fidelity Investments, the fund management giant, is another big participant in crypto custody.

For custody banks, whose services tend to be less profitable than advising on deals or taking a company public, the value in servicing digital assets may come from applying blockchain technology to streamline future financial transactions. The potential for big savings adds some glamour to an otherwise unflashy industry.

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