As the regulatory environment improves, traditional banks are restarting or expanding their digital asset custody product lines, making a widespread comeback. As early as October 2022, BNY Mellon (Bank of New York Mellon) launched its digital asset custody platform in the United States, holding and transferring BTC/ETH for selected clients. Recently, BNY Mellon has been conducting public trials in tokenized deposits and payment settlements to reduce settlement friction and promote programmable banking. This may involve BNY's Treasury Services division's approximately $2.5 trillion in daily payment processing and its approximately $55.8 trillion in assets under custody and administration. Just in mid-October, Citi Group announced that it is promoting institutional-grade crypto custody services and plans to launch related custody services in 2026 to cooperate with the improvement of the regulatory environment. This is driving significant inflows of institutional funds: by 2025, global crypto ETFs attracted $5.95 billion, and institutional Bitcoin holdings grew by 46%. Bank-grade custody services, through their strict regulatory frameworks and asset segregation advantages, are also participating in and changing the market landscape, spurring the expansion of tokenized deposits and stablecoin infrastructure. Citi's transformation may represent the attitude of traditional financial institutions towards the crypto market in recent years: from observation, piloting, and gradual progress, from payment and settlement on the test chain, to bank liabilities on the chain, and then to physical assets on the chain and native crypto asset custody. Citigroup executives have publicly stated that they believe stablecoins will expand from crypto trading tools to the mainstream economy, and that they view cryptocurrencies as part of mainstream financial infrastructure. A series of actions include: Launch of CIDAP platform: Clarifying Citi’s digital asset strategic framework. Collaboration with SDX (the wholly-owned digital asset subsidiary of the Swiss Stock Exchange SIX Group): Citi serves as tokenization agent + custodian, providing services for the tokenization of private equity/unlisted company shares. Deploy tokenized issuance/custody services: provide on-chain services for bonds, funds, and private equity assets. Citi is considering issuing its own stablecoin and is actively considering the custody and payment scenarios of the assets supported by the stablecoin. Collaborating with Payoneer to explore payment settlement business, Citi’s “Token Services” service has been used for cross-border, 24/7 transfers. Citi is developing a crypto asset custody service with the goal of launching it in 2026. This not only provides trusted custody for institutional clients, but also gradually connects the bank's traditional core business (deposits, settlement, custody, asset services) with tokenization, thereby seizing the entrance to the next generation of financial infrastructure. These businesses can be summarized as the main exploration paths of traditional banks in the field of encryption, mainly including: Institutional-grade custody: We provide cold/hot wallet custody or hybrid custody services under the compliance, audit, insurance, anti-money laundering (AML) and trust legal frameworks to meet the compliance needs of large asset managers, pension funds, and insurance companies. Tokenized assets are linked with custody and issuance: traditional assets (fund shares, government bonds, deposits) are tokenized and “custody + trusteeship + underwriting/market making” are integrated to provide complete on-chain asset services. Transaction and settlement infrastructure: Bringing internal clearing and inter-bank payments to the blockchain (programmable money) to shorten settlement cycles and reduce counterparty risk. Cooperation/white label/sub-custody model: Cooperate with encryption infrastructure providers such as Anchorage, Fireblocks, Coinbase Custody, NYDIG, etc., and implement products by combining the compliance and trust packaging of traditional banks with the on-chain technology of encryption manufacturers. When traditional banks enter and promote end-to-end crypto asset custody and asset tokenization, it is a signal that they have entered the "execution and implementation" stage. Continuing to refer to the changes in exchange reserves, BTC exchange reserves have fallen to their lowest level since 2018, decreasing by 668,000 BTC since November 2024. This trend may indicate that institutions are shifting from exchanges to self-custody/ETF models. Led by institutional custody, the custody market reached $683 billion, with banks/ETFs accounting for over 65%. What will we see? — The explosion of tokenized assets There will be an effective division of labor between large traditional custodial banks and crypto-native custodians. In the short term, a hybrid model of cooperation/white label/sub-custody will be adopted to take advantage of each other's strengths. In the short term, more and more major banks will announce or pilot custody products, and institutions will become more accepting of the combined service of "bank-level custody + third-party on-chain operation". Custody and settlement functions will be more closely integrated, partly dominated by a few large banks, and market stratification will gradually occur: large institutional funds will mainly flow into the compliance modules provided by banks/custodians; liquidity and innovation will still be provided by the native crypto ecosystem (DEX, lending agreements, etc.). What will the future look like? We will see an increasing number of compliant token products emerge. As regulations become clearer and technology matures, there will be more competition and mergers and acquisitions in the industry, and custody and clearing services may become more integrated: banks will be able to provide services ranging from funds (tokenized deposits) to assets (tokenized securities). In addition, large custodial banks occupy large institutional capital flows (pensions, sovereign wealth, ETF issuance and custody), and the integration of the four dimensions of custody, trading, payment, and settlement is advancing. Custody is not only safekeeping, but also a link in the overall financial service chain. Crypto-native services will also be integrated into it, retaining advantages in trading, DeFi access, and rapid innovation of products.As the regulatory environment improves, traditional banks are restarting or expanding their digital asset custody product lines, making a widespread comeback. As early as October 2022, BNY Mellon (Bank of New York Mellon) launched its digital asset custody platform in the United States, holding and transferring BTC/ETH for selected clients. Recently, BNY Mellon has been conducting public trials in tokenized deposits and payment settlements to reduce settlement friction and promote programmable banking. This may involve BNY's Treasury Services division's approximately $2.5 trillion in daily payment processing and its approximately $55.8 trillion in assets under custody and administration. Just in mid-October, Citi Group announced that it is promoting institutional-grade crypto custody services and plans to launch related custody services in 2026 to cooperate with the improvement of the regulatory environment. This is driving significant inflows of institutional funds: by 2025, global crypto ETFs attracted $5.95 billion, and institutional Bitcoin holdings grew by 46%. Bank-grade custody services, through their strict regulatory frameworks and asset segregation advantages, are also participating in and changing the market landscape, spurring the expansion of tokenized deposits and stablecoin infrastructure. Citi's transformation may represent the attitude of traditional financial institutions towards the crypto market in recent years: from observation, piloting, and gradual progress, from payment and settlement on the test chain, to bank liabilities on the chain, and then to physical assets on the chain and native crypto asset custody. Citigroup executives have publicly stated that they believe stablecoins will expand from crypto trading tools to the mainstream economy, and that they view cryptocurrencies as part of mainstream financial infrastructure. A series of actions include: Launch of CIDAP platform: Clarifying Citi’s digital asset strategic framework. Collaboration with SDX (the wholly-owned digital asset subsidiary of the Swiss Stock Exchange SIX Group): Citi serves as tokenization agent + custodian, providing services for the tokenization of private equity/unlisted company shares. Deploy tokenized issuance/custody services: provide on-chain services for bonds, funds, and private equity assets. Citi is considering issuing its own stablecoin and is actively considering the custody and payment scenarios of the assets supported by the stablecoin. Collaborating with Payoneer to explore payment settlement business, Citi’s “Token Services” service has been used for cross-border, 24/7 transfers. Citi is developing a crypto asset custody service with the goal of launching it in 2026. This not only provides trusted custody for institutional clients, but also gradually connects the bank's traditional core business (deposits, settlement, custody, asset services) with tokenization, thereby seizing the entrance to the next generation of financial infrastructure. These businesses can be summarized as the main exploration paths of traditional banks in the field of encryption, mainly including: Institutional-grade custody: We provide cold/hot wallet custody or hybrid custody services under the compliance, audit, insurance, anti-money laundering (AML) and trust legal frameworks to meet the compliance needs of large asset managers, pension funds, and insurance companies. Tokenized assets are linked with custody and issuance: traditional assets (fund shares, government bonds, deposits) are tokenized and “custody + trusteeship + underwriting/market making” are integrated to provide complete on-chain asset services. Transaction and settlement infrastructure: Bringing internal clearing and inter-bank payments to the blockchain (programmable money) to shorten settlement cycles and reduce counterparty risk. Cooperation/white label/sub-custody model: Cooperate with encryption infrastructure providers such as Anchorage, Fireblocks, Coinbase Custody, NYDIG, etc., and implement products by combining the compliance and trust packaging of traditional banks with the on-chain technology of encryption manufacturers. When traditional banks enter and promote end-to-end crypto asset custody and asset tokenization, it is a signal that they have entered the "execution and implementation" stage. Continuing to refer to the changes in exchange reserves, BTC exchange reserves have fallen to their lowest level since 2018, decreasing by 668,000 BTC since November 2024. This trend may indicate that institutions are shifting from exchanges to self-custody/ETF models. Led by institutional custody, the custody market reached $683 billion, with banks/ETFs accounting for over 65%. What will we see? — The explosion of tokenized assets There will be an effective division of labor between large traditional custodial banks and crypto-native custodians. In the short term, a hybrid model of cooperation/white label/sub-custody will be adopted to take advantage of each other's strengths. In the short term, more and more major banks will announce or pilot custody products, and institutions will become more accepting of the combined service of "bank-level custody + third-party on-chain operation". Custody and settlement functions will be more closely integrated, partly dominated by a few large banks, and market stratification will gradually occur: large institutional funds will mainly flow into the compliance modules provided by banks/custodians; liquidity and innovation will still be provided by the native crypto ecosystem (DEX, lending agreements, etc.). What will the future look like? We will see an increasing number of compliant token products emerge. As regulations become clearer and technology matures, there will be more competition and mergers and acquisitions in the industry, and custody and clearing services may become more integrated: banks will be able to provide services ranging from funds (tokenized deposits) to assets (tokenized securities). In addition, large custodial banks occupy large institutional capital flows (pensions, sovereign wealth, ETF issuance and custody), and the integration of the four dimensions of custody, trading, payment, and settlement is advancing. Custody is not only safekeeping, but also a link in the overall financial service chain. Crypto-native services will also be integrated into it, retaining advantages in trading, DeFi access, and rapid innovation of products.