State Street Sees Significant Opportunity in Tokenization

While State Street’s digital arm is working on the ability to custody cryptoassets by the end of the year, tokenization remains a top focus for the business going forward as institutions continue to show interest in the segment. Using distributed ledger technology to tokenize funds and private assets, for example, to improve efficiency and accessibility is something the company is working on for 2023, according to a story in Blockworks news. State Street’s assets under custody and administration were $42.6 trillion as of June 30. Its asset management arm had $3.9 trillion in assets at that time. State Street partnered with cryptoasset data and software provider Lukka in July 2021 to help it provide digital and cryptocurrency asset fund administration capabilities for its private funds clients. More recently, State Street Digital revealed in March that it entered into a licensing agreement with Copper.co to launch a digital custody offering for institutions. Copper.co provides custody, trading, and settlement solutions across 450 cryptoassets and more than 40 exchanges. State Street Digital intends to offer the ability to custody some of the “blue-chip” cryptoassets, such as bitcoin and ether, by the end of the year before introducing others. Tokenization can allow shares of a fund to be freely traded on a digital ledger, making the process more efficient for both the fund issuer and end investors, the executive said. Tokenizing private assets can solve problems around accessibility in the secondary market and liquidity in those assets, Olson added. Finally, State Street is working on adding smart contracts and distributed ledger tech to automate the process of trade collateralization, which she said can help increase the frequency in which the trades are valued and decrease risk.