|
|
Boston-based bank and asset manager State Street, with $40 trillion in assets in custody or under management, is creating a digital currency division to lead the bank into blockchain technologies, cryptocurrencies, digital currencies issued by central banks, and trading in tokens, the bank announced last week.
The new unit will be called State Street Digital and will be included in the bank’s online trading platform.
“Digital assets are quickly becoming integrated into the existing framework of financial services,” and the bank will be ready to meet customers’ needs and preferences in that area, CEO Ron O’Hanley said on 17 June in a statement disclosing the new venture.
“We see digital assets as one of the most significant forces impacting our industry over the next five years,” he added.
In the last three months, the bank’s customers have increased their dealings in cryptocurrency by 300 percent, Nadine Chakar, who will lead the new unit, told the Financial Times.
“We are getting calls from endowments and foundations getting donations in crypto and saying, ‘What do we do with this?’,” she said. “We are seeing companies thinking of adding crypto to their balance sheets.”
Earlier this month, crypto asset manager Iconic Funds appointed State Street to administer a Bitcoin-backed exchange-traded note listed on the Frankfurt stock market.
Also, VanEck Bitcoin Trust has appointed State Street as its fund administrator and transfer agent.
The bank also has been working with Pure Digital, a start-up fashioning itself as an interbank trading venue for digital currencies, O’Hanley said.
Much of that future depends on regulators.
The Federal Reserve and other bank overseers have established a “sprint team” to sketch a “regulatory perimeter” around cryptocurrencies; the U.S. Securities and Exchange Commission is mulling rules that would govern crypto-based exchange-traded funds. (See related story.)
State Street’s ongoing discussions with regulators are “intense,” Chakar said.
State Street follows Bank of New York Mellon Corp., Northern Trust, and Standard Chartered, which have announced they will offer crypto asset services to clients this year.
TRENDPOST: The bank’s news follows, by a few days, El Salvador’s announcement that the country will recognize Bitcoin as a legitimate currency. (“El Salvador Moves to Make Bitcoin Legal Tender”, Trends Journal, 8 June 2021, and related story this issue.)
As we wrote in “Cryptomania Cash-In” in our 29 June, 2018, issue, “cryptocurrency’s growth, despite a turbulent path to legitimacy, is inevitable. It is a key dynamic of the 21st century’s financial revolution.”
Financial institutions, as well as nations, are finally catching up to what we predicted three years ago.
As popular as Bitcoin and its digital siblings have become, they remain unregulated and have proven volatile. Applications to launch cryptocurrency exchange-traded funds, which we foresaw in the same 2018 analysis, languish at the Securities and Exchange Commission as Congress and the agency cogitate on the nature and shape of rules needed to rein in digital money.
State Street’s announcement will give crypto fans and investors a measure of confidence that the untethered digital coins are beginning to be integrated into more stable financial structures.
However, we also maintain our forecast that when central banks go digital, governments will impose regulations to cripple cryptocurrencies that they will deem as competition. (See our 24 March 2020 article “FROM DIRTY CASH TO DIGITAL TRASH”).