State Street and Gemini to Launch Digital Asset Pilot, Could Involve Security Tokens

State Street and Gemini to Launch Digital Asset Pilot, Could Involve Security Tokens

As of December 17th 2019, State Street has selected Gemini for the launch of a digital asset pilot project. Gemini has become increasingly involved in the security token industry — and the company’s CEO says the pilot won’t involve security tokens initially, but could in the future.

Gemini and State Street’s Digital Asset Pilot Explained

Based in Boston, State Street is one of the oldest financial institutions throughout the United States. The firm also serves as one of the largest custodians in the world, with over $32 trillion worth of assets in its custody.

State Street has now selected Gemini to participate in its digital asset pilot. Through the pilot, Gemini will provide custody services to financial institutions while State Street will calculate certain reporting and holdings information for the assets in custody.

The project claims to be a first of its kind. According to Gemini CEO Tyler Winklevoss,

“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.

Initially, two digital assets will be supported: bitcoin and ether. However, Winklevoss says the pilot “is extensible to other digital assets, such as tokenized securities, in the future”.

Gemini’s Involvement with Security Tokens Explained

The announcement comes as State Street has recently adjusted its focus when it comes to the integration of blockchain technology. Earlier this month, the institution dropped close to 100 jobs related to blockchain development.

Instead of building an entirely new infrastructure based on blockchain, State Street wants to focus more on the tokenization of existing securities and other financial instruments. The firm said 38% of its clients intend to increase their investments in the digital asset space over the course of 2020, which was a reason for the deviation.

The newly announced pilot is not the first instance where State Street and Gemini have collaborated. Gemini’s stablecoin, dubbed GUSD, is backed up by USD collateral — in the custody of State Street.

If the partnership does eventually lead to the involvement of security tokens, it wouldn’t be unfamiliar territory for Gemini. The company has teamed up with securities tokenization platform Harbor, allowing users to invest in security tokens via Harbor’s platform using GUSD.

Earlier this year, Gemini also announced plans to apply for broker-dealer license from FINRA. The license allows for the buying and selling of securities on behalf of other entities. This means Gemini could be taking steps toward facilitating the trading of security tokens.

In differing from utility tokens, security tokens demonstrate the integration of an emerging technology — the blockchain, or, Distributed Ledger Technology (DLT) — with traditional financial securities. These include regulated assets such as equity, real estate, investment funds, and even traditionally illiquid assets such as fine art. To date, the security token industry has compliantly raised almost $1 billion.

What do you think about State Street launching a digital asset pilot with Gemini? We’d like to know what you think in the comments section below.

Image courtesy of Barrons.

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