Global financial services company State Street will partner with Taurus, a Swiss digital asset infrastructure provider, to deliver tokenization services for institutional clients.
State Street has long been involved with crypto and blockchain, having previously partnered with crypto custody platform Copper. Since the firm ended that partnership last year, if might seem like a natural fit for State Street to provide crypto custodial services itself, because the organization already manages $4.3 trillion in assets.
However, the company is starting with tokenization because of the lingering regulatory concerns in the U.S. State Street pointed to the U.S. Securities and Exchange Commission’s SAB 121 Accounting Bulletin, which restricts institutions from holding their customer’s crypto assets, as a limiting factor.
“While we’re starting with tokenization, that’s not where we’re ending,” said Donna Milrod, State Street’s Chief Product Officer and Head of Digital Asset Solutions, in an interview with CoinDesk. “As soon as the U.S. regulations help us out, we will be providing digital custody services as well. We know how to be a custodian. We don’t do that on our balance sheet. We do that off-balance sheet. They’re not our assets.”
A Drawn-Out Process
The regulatory environment in the U.S. has been on the minds of the crypto community for some time. Earlier this year, SAB 121 was momentarily reversed, but that effort was later vetoed. The more crypto-friendly FIT21 was then passed in the House of Representatives, but there are still challenges to its approval.
Though crypto supporters scored a win with the approval and launch of bitcoin and ether ETFs, there is still uncertainty given the SEC’s recent actions to regulate digital assets.
“This goes along with our thesis that companies in the U.S. will continue to focus on expanding operations, or partnering with those that are in a crypto-friendly regulatory regime,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Switzerland has been involved in blockchain for longer than any other country and Taurus has developed the technology and infrastructure to facilitate an effective roll-out of State Street’s new products.”
“However, given the drawn-out regulatory process in the U.S., it may take some time for State Street to achieve its goal of offering crypto custody,” he said.