Boston-based State Street, one of the world’s largest asset managers with over $31 trillion under custody, is teaming up with Gemini, a leading cryptocurrency exchange, in order to launch a digital asset pilot that aims to integrate Gemini’s proprietary custody solution with the bank’s back office reporting.
According to a release, the pilot performs reporting scenarios on investors’ assets within Gemini Custody. It also reports holdings of two digital assets selected for liquidity purposes.
The solution can be modified to report on the portfolio holdings of other crypto assets, including security tokens. The platform’s users are able to consolidate the reporting of their digital assets serviced by Gemini, along with their traditional assets, which are managed by State Street.
Says Ralph Achkar, managing director of State Street’s digital product development and innovation,
“The digital asset space … promises opportunities that could fundamentally impact how we do things in the future. There is small, but growing demand from our clients for solutions of this type and many technical, operational, regulatory, and legal considerations [need] to be addressed. That is why we have opted for an open model, and started a pilot with Gemini as an established, regulated player in the digital asset space.”
State Street’s initiative confirms that major traditional players are entering the cryptosphere despite Bitcoin’s sluggish fourth quarter performance, which has been dragging the overall market into the red.
Anthony Pompliano, partner at Morgan Creek Digital Assets, describes the move as a sign of a much broader and powerful trend. He writes in his daily newsletter to investors,
“Both Gemini and State Street realize that reporting digital assets like Bitcoin and Ether next to traditional assets is interesting, but there is a much larger play here. They are hinting towards the likelihood that one day State Street would allow customers to have their traditional assets, their cryptocurrencies, and digitized securities all listed next to each other.”
The play could establish a new norm for commercial banks and financial institutions, blending traditional banks accounts and brokerage accounts with cryptocurrency accounts, effectively bridging the divide for mainstream customers who are not comfortable handling their own private keys or hardware wallets to custody their assets.
Such solutions could solve one of the key pain points of Bitcoin – that it’s too difficult.
Adds Pompliano,
“You can think of this as the merging of bank accounts, savings accounts, brokerage accounts, and crypto accounts all into a single account that would be overseen in some form or fashion by State Street.”