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State Street and
BNY Mellon outline
their stance on
digital assets
and why they are
not ignoring the
phenomenon
T
he world’s two largest custodian
banks have answered the question
of why they are actively engaging
in conversations around cryptocurrencies
despite not being able to provide custody
services for the burgeoning digital assets at
this moment in time.
Speaking at DAS: London, representa-
tives from BNY Mellon and State Street
confirmed, firstly, that as asset servicers
they have to be well-positioned should the
regulatory, legal and risk frameworks come
into place for investing in digital assets.
In addition, with some of their clients
already engaged in digital asset investment
and requesting services, both parties are
keeping their eyes wide open to future
possibilities.
State Street has launched a digital asset
back-office reporting pilot, in collabora-
tion with crypto exchange and custodian
Gemini Trust, adopting an open architec-
ture approach to give its traditional asset
management clients a solution if they one-
day need it. Meanwhile, BNY Mellon made
its first foray into the digital asset servicing
space with a partnership with Bakkt, the
digital currency exchange operated by
Intercontinental Exchange (ICE).
While neither of these moves involve the
22
Global Custodian
Spring 2020
Should the regulatory, legal and risk frameworks come into
place for digital assets, State Street and BNY Mellon plan
to be there to offer services for their respective clients.
private keys of digital assets being stored
at the incumbent custody providers, it’s an
exploratory and low-risk venture for the
banking giants, which shows willingness
without compromising their values or
reputation.
BNY Mellon also said it is also exploring
asset tokenisation opportunities with its
fund management clients through proof of
concepts, while it’s cross-town rival State
Street is equally as optimistic about the
potential of notion.
“There is one side we can’t ignore and
one side we shouldn’t ignore,” said Kara
Kennedy, custody product manager, di-
rector, BNY Mellon, when asked by Global
Custodian what the bank’s intentions were
around engaging in digital assets. “The first
is around tokenisation of securities and
assets, that’s our business today. To negate
looking forward to how this technology
can transform this market would be bad
for our business. We have to be aware of
these changes and how they can affect our
market, because the opportunity for this
technology is significant, particularly in
terms of the potential efficiencies it can
bring.
“On the cryptocurrency side, that’s a mar-
ket opportunity. Clients are interested and
we again want to be able to service them
across multiple asset types, but we won’t be
ready to get into that space until we have
the appropriate legal, regulatory and risk
frameworks to provide that.”
Awaiting full commitment
Both the relatively-new universe of digital
asset platforms and the traditional capital
markets players are looking to the likes of
BNY Mellon and State Street, along with
other top-tier asset servicers, to solve the
custody conundrum for cryptocurrencies.
While the potential of digital assets is
vast, the largest institutional investors are
unlikely to fully commit to investing in the