Bank Bitcoin custody is a service in which a bank safeguards bitcoin for a customer, usually by managing the private keys used to authorize transfers. The contract and applicable law determine its scope; a banking licence alone guarantees neither a particular custody arrangement nor access to the service.
Imagine a headline saying a bank “holds bitcoin.” Without more detail, we do not know whether it bought bitcoin for itself or looks after it for customers. In our example it safeguards 100 BTC of customer funds and separately owns 5 BTC. That adds up to 105 BTC, but does not mean it bought all of it as its own investment. Custody is a service for someone else. Legal ownership, the bank’s accounting treatment and its obligations to the customer need separate examination. The example itself does not establish whether the bank is permitted to own those 5 BTC. [1]
A concrete example comes from the OCC, the US authority supervising certain banking institutions. Its Interpretive Letter 1170 of July 2020 confirms custody authority for national banks, meaning federally chartered banks, and federal savings associations, federally chartered savings institutions. “National” here does not mean state-owned or a central bank. The service can include key management and different legal capacities, including a role carrying special duties to the customer. Conditions depend on the bank’s powers and applicable law. The US letter grants no licence to banks in the EU and does not require every bank to accept BTC. [1]
In March 2025, the OCC issued Letter 1183, rescinding Letter 1179 and reaffirming previously permissible activities. The rescinded supervisory nonobjection process required a special advance statement that the supervisor did not object to starting the activity. Removing it did not end ongoing supervision or banks’ duties to manage risks and comply with law. Customers should not read this as “nobody checks banks any more.” Nor does it mean that every other approval disappeared. A particular process changed; responsibility for safe and sound operations remained. [2]
A private key allows a signature needed to transfer BTC to be created. If a bank merely stores a copy while the customer retains enough information to transfer independently, the bank has not gained exclusive control. The client can retain a copy and move the funds without the bank. Letter 1170 explicitly allows this key-copy storage service alongside other models. By contrast, when explaining safekeeping, the banking agencies’ joint statement of July 2025 describes control under which nobody else, including the customer, can unilaterally move assets outside the bank’s control. Receiving an old key alone does not prove this. The statement explains existing principles and creates no new supervisory expectations. It does not prohibit every customer-held key share if that share alone cannot authorize a transfer. [1] [4]
A bank may pool customer assets in an omnibus account, an account serving multiple customers. In a simple example, customer A has 2 BTC and customer B has 3 BTC, making a customer pool of 5 BTC. The bank’s own 1 BTC is held separately. Finding those 5 BTC at an address still does not establish each customer’s share. Records and contractual arrangements must substantiate that allocation. A banking licence does not guarantee on-chain separation, such as a separate address or holding arrangement for every customer. Rights in insolvency, when an institution cannot meet its obligations, also depend on law and the particular service arrangement. [4]
Custody may be connected with buying or selling. OCC Letter 1184 of May 2025 confirms the ability to execute customer-directed trades in assets held in custody and use third parties for permissible services. An instruction to sell 1 BTC does not authorize the bank to speculate with the entire account. When another custodian performs part of the safekeeping, this is subcustody. The bank must manage that provider’s risks; outsourcing work does not remove its obligations. Customers still need to know who controls the keys, how balances are substantiated and how assets can be recovered if the provider runs into trouble. [3] [4]
OCC 1186 of November 2025 addresses a different question: owning crypto-assets for reasonably foreseeable network fees and testing otherwise permissible platforms. The decision rests on the particular bank described and limited holdings that are small relative to its capital. For illustration, 100 separate Bitcoin transactions with a fee of 2000 sat each would require 200000 sat. A satoshi, abbreviated sat, is the smallest unit of Bitcoin’s base network. This is our calculation, not an OCC fee schedule; network fees vary and differ from the bank’s service charges. The letter is not unlimited permission to speculate on rising prices. Equally, it does not say fees and testing are the only possible lawful reasons for a bank’s own holdings. [5]
US FDIC deposit insurance does not cover crypto-assets themselves, even when an insured bank provides the service. Imagine 1 BTC whose price falls from 60000 to 40000 USD. It is still 1 BTC; that price fall is not an FDIC insured event. The bank’s name does not turn bitcoin into insured money in a current account. Before using the service, find out whether you can withdraw BTC or whether the bank only sells the asset and pays out cash. Fees, restrictions, instruction processing and network confirmations also matter. Easy access to online banking does not by itself promise immediate withdrawal. [6] [4]
For the clearest picture, read this entry together with Institutional custody, Private Key, Proof of reserves, OCC Interpretive Letter 1170. The reverse links also lead from OCC Interpretive Letter 1170, Qualified custodian, Basel Crypto Standard, Operation Choke Point 2.0.