Digital assets may have just taken one giant leap – for investorkind.
Just today Gemini and State Street announced they were partnering to bring a digital asset pilot to the marketplace. The announcement, made via blog plot on Medium.com by Gemini Chief Executive Officer Tyler Winklevoss, said that while trading the infant asset class was a given on his exchange, the pilot would also allow financial institutions to be able to custody their digital assets with Gemini Custody and receive the reporting and holdings information for these assets via State Street.
“Working with State Street to pilot this program is a major milestone for Gemini and digital assets as a mainstream asset class,” Winklevoss said. “This joint pilot enables an institutional investor to test custody of digital assets via Gemini Custody and receive reporting for these assets via State Street using two trusted and regulated financial institutions — helping us build a better bridge to the future of money.”
This pilot will initially support the custody of bitcoin and ether at Gemini; with State Street providing the back-office reporting. However, it is extensible to other digital assets, such as tokenized securities, in the future.
Custody has often been the bane of digital asset trading – what happens once trade has been executed, is the problem. This has been noted from a new paper from the International Securities Services Association (ISSA), produced in collaboration with market participants, including IHS Markit. This paper identifies several key areas such as settlement, regulation and risk and technology standards in which questions must be resolved before institutional-grade asset transfer and servicing can take hold in a tokenized framework.
The Gemini/State Street offering looks to address some of these issues. According to a release from the pair, this pilot performs reporting scenarios on a user’s holdings within Gemini Custody. Initially, the pilot reports holdings of two cryptocurrencies chosen for liquidity reasons. However, it can be adapted to report on holdings of other digital assets, such as security tokens. It allows the user to consolidate the reporting of their digital assets serviced by Gemini, an independent digital asset custodian, with their traditional assets serviced by State Street.
“We want to evolve our business with our clients’ needs. The digital asset space is still nascent, yet it promises opportunities that could fundamentally impact how we do things in the future,” said Ralph Achkar, managing director, Digital Product Development & Innovation at State Street. “There is small, but growing demand from our clients for solutions of this type and many technical, operational, regulatory, and legal considerations to be addressed. That is why we have opted for an open model, and started a pilot with Gemini as an established, regulated player in the digital asset space.
Jeanine Hightower-Sellito, Managing Director, Operations at Gemini said that the union was the culmination of 18 months of due diligence and research.
“This is an amazing milestone, not only for Gemini, but for digital assets as a mainstream asset class,” she said.
Bryan Marty, CFA and Senior Associate, Capital Markets at S&P Glbal Markets Intelligence said the development was very interesting.
Lisa Seim, and Advisory Board member at MobiePay was excited to see the union and that it could mean fresh ideas for the custody and trading of digital assets.
“More and more collaboration… refreshing to see the old match with the new,” she commented on LinkedIn.
Alan Kostrinsky, advisor and Business Development Director at OpenCrowd said the announcement was indeed a positive for the digital asset market.
“Great news and another important step in adoption,” Kostrinsky said.