Administering back-office services for cryptocurrency ETFs will play a big part in State Street’s attempt to generate significant new business from asset managers’ and institutions’ ardour for digital assets and blockchain, executives said last week.
Providing such services for bitcoin and other cryptocurrency ETFs in the US and globally is one area in which the firm wants “to go deep” with State Street Digital, the digital-finance unit it launched earlier this month, said Eric Aboaf, chief financial officer at State Street, during last week’s Morgan Stanley US Financials Conference. The new division will focus on cryptocurrency, central bank digital currency, blockchain and tokenisation, the company said.
“That’s a land grab that we think is particularly important . . . and one where we’re focused on [market] share and execution,” Aboaf said.
State Street is focused on growing its service workload with existing large asset managers and expanding into new markets, noted Aboaf and Francisco Aristeguieta, the company’s chief executive of institutional services, during a joint presentation.
Recently, an increasing number of clients have asked State Street how it would be able to support crypto investments, digital assets and blockchain-based operations, they noted. So State Street is positioning itself to work the emerging technology into its service model, they added.
So far, at least eight providers have disclosed plans to launch cryptocurrency ETFs. The Securities and Exchange Commission has not given any the green light. However, State Street thinks it is inevitable that regulatory hurdles to blockchain and digital assets will be cleared, Aristeguieta said.
State Street, BNY Mellon, and US Bank are among the fund custodians that plan to dive into cryptocurrency and digital assets administration. Other global custodians, such as Citi and JPMorgan, are reportedly exploring how they can support the asset class.
State Street has already been selected by VanEck to handle transfer agency and administration work for its crypto ETF, if approved. Iconic Funds has also tapped the Boston-based service provider for its planned European bitcoin exchange traded note.
State Street Digital was in the works for more than a year before it was made public last week, Aboaf said. The idea for the unit was sparked by client demand, as well as the “very intense” conversations that State Street has had with regulators, Aristeguieta said.
The company is examining how crypto can be integrated into many areas of its business, including traditional custody and fund administration, as well as specialised services such as data, analytics and trading.
“You’ve got to plant multiple flags, you’ve got to operate in multiple areas,” Aboaf said, pointing to private cryptocurrencies and tokens that central banks are considering launching. “This is our way to scale our offering,” he added.
*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.