Today State Street announced that it has selected Swiss-based Taurus for digital asset custody and tokenization technology. Earlier this year State Street Digital reorganized the division with a few layoffs. The aim was to integrate State Street Digital into the bank’s traditional custody product group.
It’s a big win for Taurus, but State Street is not its first major banking customer. It counts Deutsche Bank, CACEIS and Santander as clients and received investment from Credit Suisse, Deutsche Bank, Arab Bank Switzerland and Pictet Group. However, in terms of custody, State Street is in a different league, with $44.3 trillion in assets under custody or administration, a close second to BNY Mellon.
“We are excited to be working with Taurus as we continue to elevate our digital asset capabilities and deliver the innovative solutions our clients have been seeking,” said Donna Milrod, State Street’s chief product officer and head of Digital Asset Solutions.
In a statement the bank said, “Subject to receipt of applicable regulatory approvals, State Street will leverage Taurus’ fully integrated, custody, tokenization and node-management solutions to automate the issuance and servicing of digital assets, including digital securities and fund management vehicles, in accordance with applicable institutional standards.”
In March last year State Street split from its previous provider, Copper, and at one stage it was working on developing a solution in-house.
Fortunately for State Street, the delay hasn’t had a major competitive impact as U.S. regulatory headwinds have obstructed banks from participating in digital asset custody.
Digital asset custody & SAB 121
SEC accounting rule SAB 121 requires listed companies to show digital assets under custody on their balance sheet as an asset and liability, a hugely unorthodox accounting treatment. The interaction with regulatory rules for banks imposes significant costs on banks providing digital asset custody in the United States. No banks are looking after the digital assets that back the spot Bitcoin and Ethereum ETFs.
In July Congresswoman Maxine Waters said there would be targeted amendments to SAB 121 for some banks. Bloomberg subsequently reported that banks had been discussing the issue with the SEC and some had satisfied the regulator with their safeguards. That State Street didn’t have a technology partner with a battle proven digital asset custody solution could have affected the decision to partner with Taurus.
