State Street’s New Digital Asset Strategy

State Street, a leading global custody bank managing $44.3 trillion in assets, has selected Taurus, a specialist in cryptocurrency custody and tokenization, to advance its digital asset services. The partnership comes as the bank prepares to naviGate U.S. regulatory challenges, focusing initially on tokenization rather than direct crypto custody.

Initial Focus on Tokenization

The initial phase will concentrate on creating tokenized versions of traditional assets, with the first client expected to be announced shortly after the service goes live. Tokenization allows for benefits such as 24/7 trading and optimized collateral management and aims to bridge the gap in digital asset services while awaiting a more favorable regulatory environment.

Regulatory Challenges and Advocacy

State Street has expressed concerns about the SEC’s proposed Staff Accounting Bulletin 121 (SAB 121), which imposes significant capital requirements on banks holding customer crypto assets. The bank has advocated for changes to SAB 121 to reduce these burdens. Donna Milrod, State Street’s chief product officer and head of Digital Asset Solutions, emphasized that while the focus is currently on tokenization, the goal is to eventually offer digital custody services as well.

Taurus’s Role and Industry Impact

Taurus, based in Switzerland, will support State Street in this endeavor. Co-founder and managing partner Lamine Brahimi highlighted the potential positive impact of this partnership on the U.S. financial markets, which have lagged behind European markets due to current regulatory constraints.

Previous Engagements and Future Prospects

State Street has a history of engagement with blockchain technology, previously collaborating with crypto custody firm Copper. However, Copper has since shifted its focus to its ClearLoop settlement system, underscoring the evolving landscape of digital asset services.

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