State Street, the $2.7 trillion custodian, is quietly diving into crypto – but don't expect bitcoin custody

When institutions?

It's a question that hangs over the budding cryptocurrency market, which hasn't been able to lure in traditional capital as quickly as some enthusiasts might have hoped. Many say one of the key impediments has been a lack of proper custodians with a big brand name.

Fidelity, the multi-trillion-dollar asset manager, sprang up its own crypto custody business at the beginning of the year. There are a number of startup players in the market as well. Still, market participants have anticipated State Street's entrance into the cryptocurrency custody business. I wouldn't recommend those folks hold their breath, as per a recent conversation with Jay Biancamano, managing director at the firm.

Biancamano, who leads the folks working on blockchain and digital asset initiatives at the bank, said bitcoin, and specifically bitcoin custody, are not businesses the firm is looking to roll out any time soon. 

"We're intensely led by our clients and our clients right now are not investing in cryptocurrencies and for a number of reasons," Biancamano said on a recent episode of The Scoop, referring to regulatory hang-ups.

Biancamano's remarks mean things haven't changed much since 2018, when he said the firm wasn't getting involved in custodying cryptocurrencies because "none of our clients are looking for us to house these assets in custody."

So what exactly is State Street up to? Well Biancamano said the $2.7 trillion custody bank is more focused on digital assets and is working with its clients on "a number of proof of concepts." Specifically, it is exploring digital asset trading, fund administration, and custody. 

"We are in the learning phase," he said. 

Client proof-of-concepts

As part of that learning phase, the firm has outlined "a framework for custody around crypto assets." 

To be sure, that initiative is just one proof-of-concept project alongside a number of others the firm is exploring with clients. 

"Similarly Fund Administration and Trading are in similar phases, each one designed to understand what we would need to provide should we move more assertively into these areas for crypto or digital assets," he said in an email. "Ones that are a bit more nascent include ideas like Issuance and tokenization of existing assets, whereas the earlier POCs are more of a learning process for existing process, these latter one’s are new opportunities."

As for the team, Biancamano said the firm wouldn't disclose specific numbers, but noted that State Street's crypto workforce spans the firm's numerous businesses. 

"We are working with internal teams as well as external partners and it would be hard to give a specific number of all of those involved," he said.