State Street’s Digital Asset Custody Plan

State Street, a large custodian bank with a presence in cryptocurrency, plans to launch a digital asset custody business next year, as reported by The Information. This initiative signifies a significant shift for Wall Street banks, which have generally avoided direct involvement in cryptocurrency.

The announcement follows the U.S. Securities and Exchange Commission’s cancellation of the controversial accounting bulletin, SAB 121. This bulletin mandated that companies holding crypto assets on behalf of customers must record a corresponding liability on their balance sheets. SAB 121 faced opposition from participants in both the crypto sector and traditional finance (TradFi), who cited high compliance costs. Additionally, some lawmakers, including Senator Chuck Schumer, expressed concerns after the Government Accountability Office determined it violated congressional procedures.

According to The Information, State Street intends to provide custody and transfer agency services for tokenized assets, helping clients utilize tokenized assets, such as tokenized Treasurys, as collateral. Chief Product Officer Donna Milrod mentioned that the firm plans to onboard clients across these services gradually starting next year. However, the Federal Reserve must approve various aspects of State Street’s crypto custody business.

State Street has previously engaged in crypto initiatives, including a partnership with crypto data provider Lukka in 2028 to enhance digital asset fund administration services. The firm established State Street Digital in 2021 to broaden its crypto operations, updating GlobalLink to support cryptocurrency trading.

Moreover, State Street serves as the fund administrator and transfer agent for several crypto exchange-traded funds, such as the VanEck Bitcoin Trust, and acts as the issuing and paying agent for two new European exchange-traded commodities (ETCs).