In the past, those who have straddled both the traditional finance arena and the cryptocurrency industry have been forced to track their activities in these sectors separately, as to date crypto has mostly been developed entirely on the periphery of the mainstream.
Yet a new collaboration between New York-based crypto exchange and custodian Gemini and American financial services powerhouse State Street could be set to evolve this reporting reality for good, however.
Announcing the effort on December 17th, State Street — which is among the biggest asset management firms ever in currently managing more than $2.5 trillion USD worth of assets — said it’s teaming up with Gemini’s crypto custody arm on a “digital asset pilot” that will allow a selection of users to report their bitcoin (BTC) and ether (ETH) activities on Gemini alongside their “traditional assets serviced by State Street.”
Notably, the meld could point the way forward for other large financial institutions looking to help their customers engage with crypto in mainstream fashion.
“Growing Demand From Our Clients”
The “first of its kind” pilot will give State Street a feel for the processes required to help its users report their crypto activities as they would their traditional financial activities.
Per Ralph Achkar, a State Street managing director of Digital Product Development & Innovation, the pilot comes as part of the firm’s bid to adapt to better serve its customers, including its future customers:
“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. 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.”
And while the aforementioned pilot is starting out by only tracking bitcoin and ether transactions, the initiative could later be scaled up to “report on holdings of other digital assets, such as security tokens,” State Street said.
Since compliant security tokens are likely to be more attractive to average investors than decentralized cryptocurrencies — at least for the foreseeable future — the pilot and its possible later expansions put the effort on track to break down key wall between crypto and the mainstream.
“Traditional investors will more seamlessly be able to allocate capital in their portfolio to digital assets through trusted and regulated financial institutions — helping us build a better bridge to the future of money,” said Tyler Winklevoss, chief executive officer of Gemini.
Changing Tides for Portfolios Nearing?
In comments made to The Scoop podcast in October, Jay Biancamano, another State Street digital asset lead, noted that general adoption of cryptocurrencies had been hampered thus far by inadequate user experience (UX) realities as a result of underdeveloped infrastructure in the sector.
“It is a little clunky or cumbersome to trade [cryptocurrency], and not as seamless as our clients are used to,” Biancamano explained.
With that said, though, the State Street exec estimated that within half a decade’s time, mainstream portfolios will likely evolve toward having digital assets as a natural part of their composition.
As such, Biancamano noted that companies that positioned themselves to capitalize on this shifting dynamic could create entirely new business models.
“If you’re at the forefront of that, you could figure out ways to provide new products, new services around that,” Biancamano said.
Indeed, it seems precisely in this vein that State Street’s collaboration with Gemini has arisen: to prepare early for a potentially large change in the world’s financial status quo, wherein crypto-powered commerce appears well poised to grow in the years ahead.