The key to mainstreaming cryptocurrencies: it's not the price, but custody and licensing

Written by: Prathik Desai

Translated by: Block unicorn

Introduction

In the late 1960s, Wall Street faced a relatively unnoticed problem. As securities trading became more widespread, trading activity surged, but the infrastructure supporting these transactions remained outdated. Brokers still settled trades through physical exchange of stock certificates. Messengers ran around Manhattan delivering envelopes. Back-office departments were filled with forms. The volume of trades increased so dramatically that the U.S. markets had to halt trading every Wednesday for six consecutive months to clear the backlog of paperwork.

This ultimately evolved into the infamous “Paper Crisis.”

Neither better “runners” nor more paper documents could solve the problem. So, in 1973, all liquid assets were replaced with deposit trust companies (DTC). This company securitized securities and changed ownership through ledger updates instead of physical stock certificates. The modern U.S. securities market we see today began with this decision, which has undergone multiple iterations and evolutions.

Today, DTC holds over 1.4 million securities valued at $87.1 trillion, including securities issued in the U.S. and over 130 other countries and regions.

We also see similar narratives in financial history. When an asset class grows large enough and becomes popular, its development is driven not just by ledger record strategies but fundamentally by trust. After the launch of DTC, ordinary investors no longer needed to worry about ownership issues because trust in the central institution’s record-keeping replaced the need for physical certificates.

The same issue appears in the cryptocurrency space. Over the past two years, with the rise of ETFs and other investment forms like digital asset bonds, cryptocurrencies have increasingly attracted mainstream interest in the U.S.

This development has prompted back-office departments to act swiftly, much like how the paper crisis of the 1960s led to the creation of DTC.

In crypto, “paper” refers to private keys, which are more like unregistered notes—whoever controls the private key controls the asset. This introduces familiar issues for financial institutions: operational control, asset segregation, auditability, bankruptcy, governance, and the fact that losing a private key means permanent loss.

Now, a new trust mechanism is being built around these challenges: trust bank charters. In today’s article, I will explain why many companies are rushing to apply for cryptocurrency custody bank licenses.

The Surge in Licensing

In recent months, the U.S. Office of the Comptroller of the Currency (OCC) has been approving and processing an increasing number of applications aimed at becoming national trust banks related to digital asset custody and stablecoin infrastructure.

On December 12, 2025, the OCC conditionally approved five such applications, including Circle’s first national digital currency bank, Ripple’s trust bank, and conversion applications from BitGo, Fidelity Digital Assets, and Paxos. Subsequently, Stripe’s crypto division Bridge and Crypto.com received preliminary approval from the OCC in February 2026.

The queue isn’t limited to native crypto companies.

Last week, the world’s largest wealth management firm, Morgan Stanley, applied to establish a trust bank called Morgan Stanley Digital Trust National Association.

Do you know what these applications have in common? They are not applying to become ordinary banks offering deposit and loan services. Unlike traditional banks, these national trust banks cannot accept deposits or issue loans, nor are they insured by the Federal Deposit Insurance Corporation (FDIC). They are applying to provide custody, safekeeping, and trust management services. Think of them as specialized ledger services for crypto assets.

I see this as one of the clearest signs that cryptocurrency is changing how traditional financial institutions operate, while elsewhere the world remains busy watching crypto price fluctuations.

Bank licenses may sound dull, but like many other innovations in financial infrastructure, they remind us of lessons learned from the paper crisis. They also highlight that the core of crypto mainstreaming lies in custody and control.

Why Now?

The surge in applications for trust licenses is closely related to recent clarifications by the OCC regarding the authority of national banks in crypto custody activities. In May 2025, the OCC confirmed that national banks and federal savings associations could buy and sell custody assets on customer instructions.

In December 2025, the OCC further clarified that banks could act as intermediaries, conducting “riskless principal” crypto transactions without holding inventory.

Last week, on February 27, 2026, the OCC clarified that starting April 1, 2026, national trust banks could engage in non-trust activities beyond their narrow fiduciary responsibilities.

Why is this important? If you are a company involved in custody, settlement, reserve management, or related services, this is crucial.

We’ve seen similar situations in finance before.

In the early 2010s, as fintech companies developed applications on top of partner banks, new types of banks emerged. While these apps made banking more convenient, issues arose. Although the apps had user interfaces, the partner banks still controlled deposits, infrastructure, and regulatory permissions. When problems occurred, responsibilities were dispersed across multiple entities, leading to confusion.

The approach then was similar to what we see now in crypto: managing risk and reward.

In 2016, the OCC began exploring issuing special-purpose national bank charters for fintech companies. Two years later, it started accepting applications from non-deposit fintech firms engaged in core banking activities.

Although courts rejected the possibility of granting bank charters to non-deposit institutions, fintech companies continued to reduce reliance on partner banks. Some transitioned into full-service banks through traditional, often more cumbersome, methods (sometimes including acquisitions).

Varo initially was a fintech company that obtained a full-service national bank charter in 2020. Jiko transformed into a bank by acquiring a small national bank. SoFi received conditional approval in 2022 to become a full-service national bank through acquiring an existing bank.

The current wave of trust bank charters follows a similar pattern, but this time, Washington is also crafting new safeguards for digital assets.

All these developments are underpinned by legislative changes, which more clearly explain why companies are applying for national trust bank charters—not just for custody services in crypto.

In July 2025, President Donald Trump signed the GENIUS Act, establishing a federal framework for stablecoin payments. Several companies seeking trust bank structures have explicitly stated plans to operate stablecoin and related reserve activities within this federal regulatory framework.

Both Bridge and Circle mentioned this in their announcements.

This answers the first part of “Why now?” Regulatory clarity has opened new value chains for existing companies (both traditional and crypto-native), enabling them to expand their business scope.

The second aspect involves market structure.

Institutional investment in crypto has shifted toward vehicles similar to traditional financial products, such as ETFs, funds, and managed accounts. These vehicles require trusted custodians that meet legal and operational standards.

If you think centralized crypto investments are no longer needed, you’re mistaken. The development of crypto ETF infrastructure proves this.

In April 2025, BlackRock, the world’s largest asset and crypto fund manager, added Anchorage Digital Bank as a Bitcoin custodian alongside its existing partner Coinbase for its iShares Bitcoin Trust. BlackRock stated this was part of “ongoing risk management” to meet growing retail and institutional demand.

What value do giants like Morgan Stanley, with a market cap of $9 trillion, see in these developments?

One recent sign appeared at the “Enterprise Bitcoin” conference less than two weeks ago. During a fireside chat, MicroStrategy CEO Phong Le said, “If anyone can help the world ‘take the red pill,’ it’s Morgan Stanley.” Morgan Stanley’s head of digital assets strategy, Amy Oldenburg, responded, “That might be accurate.”

What changes?

Connecting these developments, the surge in trust licenses no longer looks like a crypto story but more like the evolution we saw with DTC.

As crypto gradually becomes a financial asset, retail and institutional investors need a place to store private keys that is recognized by lawyers, auditors, and regulators. Establishing national trust bank licenses is a large-scale solution to this problem.

Next is the economic aspect of this business line. Custody services may seem to have low fees. Starting in Q1 2025, Coinbase stopped disclosing custody fee revenue as a separate line item, instead including it in “other subscription and service revenue.” However, the complexity of custody is far more than it appears.

Who controls custody controls the collateral, which in turn determines the institution’s financing capacity. Financing influences leverage, which affects trading volume. Ultimately, trading volume drives revenue.

In 2025, global securities lending revenue is projected to reach $15.3 billion, with loan balances exceeding $4 trillion. State Street reported total revenue of $13.94 billion in 2025, with about 40% ($5.32 billion) coming from services like custody, accounting, fund administration, recordkeeping, and client reporting.

Thus, while custody alone may not generate substantial revenue, ancillary services around custody can create recurring income streams.

DTC became indispensable because it enabled the market to scale without being overwhelmed by paperwork. Today, DTC has evolved into a comprehensive system that goes far beyond safekeeping; it provides settlement, corporate action processing, and underwriting support. It has formed a complete ecosystem built around updating ownership records.

Obtaining a crypto custody license can offer similar benefits. Besides acting as a vault, these institutions can provide authorized ledger interfaces.

The license allows these entities to offer trusted record-keeping, segregation, transfer, and auditability of digital assets. They can achieve this without becoming depository banks, through streamlined balance sheets and more focused operations.

However, trust licenses face criticism.

Traditional banking supporters argue these licenses could serve as a “backdoor” into the banking system without taking deposits or assuming the same broad public obligations. Banks are debating where to draw the line.

While debates continue, regulatory changes are underway. The OCC’s conditional approvals may not be final, but they send an important message: despite the self-custody ethos, the scale of crypto has grown large enough that operational back-end importance is now undeniable.

I believe that if industry insiders call the surge in trust bank license applications a crypto phenomenon, they are mistaken. It is more a natural evolution of market participants seeking to create value by addressing industry inefficiencies.