State Street, one of the world's largest asset management and custody firms, has announced plans to work towards tokenising funds and private assets using distributed ledger technology (DLT). The strategic move follows its digital arm’s initiative to offer institutional clients custodial services for digital assets by the end of this year.
State Street's intention in tokenising private assets is to improve efficiency for both the fund issuer and end investor, accessibility in the secondary market and liquidity in those assets. State Street’s vice president of digital product development and innovation, Nicole Olson, said that:
‘[Tokenization] is exciting for me because there’s a significant opportunity there for State Street to play and for State Street clients…it’s broadly adding digital tech to those more traditional assets and bringing them into the future.’
Olsen also praised the benefits of asset tokenisation:
‘Tokenization holds the promise of greater liquidity, more transparency and faster transactions. If its potential can be exploited fully, the world of assets will be more accessible than ever.’
In 2021, State Street partnered with Lukka, a cryptoasset data and software provider, to offer its private clients digital and cryptocurrency fund management services. State Street Digital has partnered with Cooper.co on its digital custody offering for institutions. State Street is also working on incorporating smart contracts and DLT technology to automate the process of trade collateralisation.
State Street's announcement is the latest in a string of announcements by leading financial institutions, such as Blackrock, Barclays, Santander, and ANZ, that are looking to leverage the benefits of DLT and tokenisation and increase their crypto-related offerings to clients. Despite large sell-offs in cryptocurrency markets since November 2021, institutional investment and interest in digital assets has continued to grow unabated.