State Street’s digital asset arm has “no plans” to trade crypto anytime soon, but is instead focusing the vast majority of its efforts on bringing existing trades onto the blockchain, according to the unit’s global head Nadine Chakar.
The world’s largest custodian bank is going “super gung-ho” on the process known as tokenization, Chakar said Financial news just over a year after the establishment of the department.
Chakar said about 80% of the digital assets unit’s projects involve tokenization, which she believes will help banking “much better, faster and more efficient over time”. It has the potential to “change everything we do,” she said.
State Street launched its digital asset arm last year with Chakar, formerly head of global markets, in charge.
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It is among a number of major financial institutions dipping their toes into the crypto ecosystem. JPMorgan, Goldman Sachs, Nomura and BNP Paribas all have significant operations focused on blockchain and digital assets, and analysts have predicted that more so-called tradfi firms are likely to follow.
Asset managers and pension companies such as BlackRock and Fidelity have all played in the space in recent times. BlackRock recently partnered with crypto exchange Coinbase to bring crypto trading to its clients, and launched a new spot bitcoin private trust for institutional investors in August.
While State Street launched its digital asset arm with a team of around 450 employees, trading crypto directly is “not on the cards” for the bank at the moment due to the volatile nature of the asset and the lack of regulatory clarity in the sector worldwide.
“Customers have trusted us with their assets for the last 70 or 80 years, and we’re not going to do anything to jeopardize that reputation,” Chakar said.
BNP Paribas Asset Management chief Sandro Pierri told recently United Nations that the fund manager has a similar stance on crypto investments, but that it is also looking at tokenization and other blockchain applications. – We have not heard significant interest [in cryptocurrencies] from our customer base,” he said in September.
The desire by financial institutions to distance themselves from direct crypto investments comes after a dramatic market crash in digital assets, which saw bitcoin and ethereum lose more than half of their value earlier this year.
The collapse has also cost thousands of jobs across the industry, and came ahead of a string of resignations in recent months from CEOs such as Jesse Powell at crypto exchange Kraken and Alex Mashinsky at cryptolender Celsius.
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Elsewhere in the area, State Street has expanded its capabilities by making deals with sector specialists. It disclosed in March that it had entered into a licensing agreement with Copper to provide digital custody services to institutions. Copper offers custody, trading and settlement across 450 cryptoassets and more than 40 exchanges.
State Street is pushing tokenization “full speed ahead,” Chakar said. Among other things, the company looks at [tokenising] all our illiquid securities” including bank loans, real estate and private equity.
It is not the only financial services firm that has focused its digital assets on tokenization. Abrdn CEO Stephen Bird told United Nations in August that the process would “transform asset management for cost, speed and control reasons”.
Schroders also took a stake in Forteus earlier this year, an asset manager focused on blockchain and digital assets, with hopes of offering tokenized funds to clients.
To contact the author of this story with feedback or news, email Alex Daniel
