Global financial services firm State Street will partner with Taurus, a Swiss digital asset infrastructure provider, to provide tokenization services to institutional clients.
State Street has long been involved in cryptocurrencies and blockchain, having previously partnered with crypto custody platform Copper. Since the company ended that partnership last year, it might seem natural for State Street to provide crypto custody services itself, given that the organization already manages $4.3 trillion in assets.
However, the company is pushing into tokenization due to ongoing regulatory concerns in the U.S. state. Street pointed to the U.S. Securities and Exchange Commission’s SAB 121 accounting bulletin, which prohibits institutions from holding their clients’ crypto assets, as a limiting factor.
“We’re starting with tokenization, but we’re not there yet,” Donna Milrod, chief product officer and head of State Street’s digital asset solutions, said in an interview with CoinDesk. “As soon as U.S. regulation helps us, we will also provide digital custody services. We know how to be a custodian. We don’t do it on our balance sheet. We do it off balance sheet. These are not our assets.”
A process that takes time
The regulatory environment in the United States has been a concern for the crypto community for some time. Earlier this year, SAB 121 was temporarily canceled, but that effort was later rejected. The more crypto-friendly FIT21 later passed the House of Representatives, but its approval still poses challenges.
Although crypto proponents have scored a victory with the approval and launch of Bitcoin and Ether ETFs, uncertainty remains given the SEC’s recent actions aimed at regulating digital assets.
“This is consistent with our thesis that U.S. companies will continue to focus on expanding their businesses or partnering with those that are subject to a crypto-friendly regulatory regime,” said Joel Hugentobler, a cryptocurrency analyst at Javelin Strategy & Research. “Switzerland has been involved in blockchain longer than any other country, and Taurus has developed the technology and infrastructure to facilitate an efficient rollout of State Street’s new products.”
“However, given the length of the regulatory process in the United States, it may take some time for State Street to achieve its goal of offering cryptocurrency custody,” he said.
