[NEWS] Asset management and bank State Street issues stablecoin

It has been revealed that State Street, a major asset management and banking company, will issue its own stablecoin. Bloomberg reported on the 18th.

According to the report, State Street is considering participating in various digital tokens.

The bank has already invested in Fnality, an interbank DLT settlement solution backed by 20 institutions. Bloomberg reported, citing people familiar with the matter, that the bank is considering joining other DLT (distributed ledger) settlement consortiums, tokenizing deposits, and issuing stablecoins.

Tokenizing deposits is not surprising, but if it does issue a stablecoin, it would be the first time for a major bank to do so.

It is highly unlikely that U.S. banking regulators will approve a bank to issue a stablecoin. However, State Street has a large asset management subsidiary under its umbrella, so it could happen.

Recently issued cryptocurrency-related ETF

State Street Global Advisors (SSGA) recently partnered with Galaxy Asset Management to launch a cryptocurrency-related ETF. Notably, Galaxy is working with another bank-backed asset manager, German bank DWS, on the AllUnity Euro stablecoin.

Settlement of tokenized assets would trigger the need for stablecoins. SSGA may want to tokenize funds.

Many incumbents that have launched tokenized funds on public blockchains, such as Franklin Templeton, support settlement using stablecoins.

ETF issuer WisdomTree, which is also a shareholder in Fnality, plans to issue its own stablecoin and recently obtained a trust license to do so.

If an asset manager is willing to offer redemptions using stablecoins, it would ideally need to hold a significant stablecoin balance.

But stablecoins do not pay interest. On the other hand, if an asset manager holds its own stablecoin, it can earn interest on the government bonds that back the stablecoin.

Major asset manager BlackRock does not have its own stablecoin, but stablecoin issuer Circle has offered to buy back BlackRock's BUIDL tokens.

BUIDL is a tokenized money market fund for asset management companies. BlackRock has also invested in Circle and manages most of its reserves.

For tokenized deposits, JP Morgan has rolled out JPM Coin and Citi has rolled out Citi Token Services. This is convenient for multinational companies that transact with the same bank in different countries. However, there are interesting efforts being made for payments involving multiple banks.

State Street is not currently participating in any high-profile efforts. For example, in the United States, the Regulated Payments Network is launching a new series of trials coordinated by SIFMA. Participants include JP Morgan, Citi, Wells Fargo, Visa, and Mastercard. State Street's biggest competitor, BNY Mellon, is cooperating with the project. It will become clear which projects State Street will participate in.

Source: Bloomberg
Image: Shutterstock

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