Northern Trust, a traditional financial institution that was founded in 1889, is piloting new cryptocurrency programs to expand its services. Forbes reports that the company’s expansion into blockchain will involve three “mainstream hedge funds.”
Hedge fund clients that are betting on Bitcoin and Ethereum will be able to use new financial services being developed by Northern Trust to help value and record cryptocurrency investments.
The Chicago-based company is one of the largest banks in the US. It has nearly $10.7 trillion in assets under management, and reportedly represents nearly 20% of the wealthiest families in the US. Its services are managed through a network of 85 US offices across 19 states, Washington, D.C. and 23 international locations, including Canada, Europe, the Middle East and Asia.
The company has a strong track record. As of June 30, 2018, it had $10.7 trillion in assets under custody/administration, $8.1 trillion in assets under custody, $1.1 trillion in assets under management and $135 billion in banking assets.
Expansion into blockchain-related services is based on its analysis of the fundamentals.
“You can take anything today. You can take movie rights, you can take all sorts of entities, and you can create a token for those,” said Cherecwich in an interview with Forbes. “We have to be able to figure out how to hold those tokens, value those tokens, do those things.”
Northern Trust issued a June 2018 report where it reveals its position on cryptocurrencies.
“Northern Trust is taking a cautious approach towards cryptocurrencies given the current lack of asset class definition by regulators and government. This approach is mirrored by other banks around the world.
However, although there are many concerns associated with cryptocurrencies, Northern Trust believes that digital currencies, with appropriate regulatory oversight, are likely to play a role in shaping future developments in our industry and we are actively working with industry associations to advocate and contribute to the development of policy and regulatory frameworks.
The company points out that Bitcoin and altcoins have yet to mature and reach their potential.
“The potential future benefits are still very much in flux and will be shaped by the continuing evolution of the technology, its deployment in the industry and marketplace and the pace of regulatory developments.
Whilst governments, legislators and regulators are currently wrestling with the immediate risks and challenges, most acknowledge that the cryptocurrency phenomenon will, in some form, become a permanent feature of the future global digital economy and the pace of regulatory developments.”
The company also notes that “cryptocurrencies can be used in exchange for goods and services but opportunities for this are currently very limited.”
While Northern Trust is clear that it is not opening any custody services for cryptocurrencies, its plan is to facilitate clients that are invested in cryptocurrencies and to create a framework for a future where all currencies are tokenized.
Speaking with Forbes, Cherecwich said, “I do believe that governments will ultimately look at digitizing their currencies, and having them trade kind of like a digital token — a token of the US dollar — but the US dollar [would still be] in a vault somewhere, or backed by the government.”