State Street Selects Taurus for Crypto Custody, Tokenization

As an analyst with extensive experience in the financial industry, I see State Street’s move towards tokenization as a strategic step in navigating the complex U.S. regulatory landscape. Given my background, I can appreciate the hurdles that banks face in the crypto space, particularly with the SEC’s SAB 121.

In expectation of a potentially friendlier regulatory environment in the United States, State Street, a global bank handling over $44.3 trillion in assets, selected Taurus, a specialist in cryptocurrency custody and tokenization, to provide digital asset services.

Initially, the bank intends to launch tokenized forms of conventional assets, and it expects to announce the first client soon, according to State Street.

For a custodian such as State Street, it would be quite fitting to manage digital assets. However, U.S. banks have encountered a significant challenge due to the Securities and Exchange Commission’s (SEC) proposed Staff Accounting Bulletin 121 (SAB 121). This regulation poses constraints for companies aiming to store their clients’ cryptocurrencies.

State Street has been strongly advocating for a modification of SAB 121. This regulation could potentially require banks aiming to hold cryptocurrencies to set aside a substantial amount of capital as a precaution against risk, as per Donna Milrod, the Chief Product Officer and Head of Digital Asset Solutions at State Street.

“Milrod mentioned during an interview that although we’re initially focusing on tokenization, it won’t be the final step. Once U.S. regulations permit us, we plan to offer digital custody services too. We’ve got experience in being custodians, but we don’t keep those assets on our books. Instead, we manage them off-balance sheet.”

As an analyst, I’ve taken note of Lamine Brahimi’s insights from his role as co-founder and managing partner at Taurus in Switzerland. He underscores the advantages of tokenization, which include the convenience of round-the-clock trading opportunities and the potential for enhanced collateral management optimization. Simultaneously, he emphasizes the importance of establishing a more favorable regulatory environment within the United States to foster growth and stability in this sector.

“Brahimi stated during an interview that he is confident that our partnership with State Street will send a favorable message to the broader U.S. financial markets. He pointed out that due to SAB 121, these markets have been performing below those in Europe.”

State Street has a long history in blockchain technology and digital assets, most recently working with crypto custody firm Copper before the startup pivoted away from custody to focus on its ClearLoop settlement system.