World’s Largest Custodian: Our Clients Have ‘A Very High Level of Interest’ in Crypto

226-year-old State Street, the second oldest U.S. Bank (after Bank of New York) and the world's largest custodian with approximately $33.12 trillion under custody and administration, says that its clients have "a very high level of interest" in cryptoassets.

On Thursday (29 November 2018), Jay Biancamano, a Managing Director for Digital Product Development and Innovation at State Street (in Princeton, New Jersey), was speaking as part of a panel called "Crypto Custody: The Key to Unlocking Institutional Capital" at American Banker's two-day "Block|FS" conference (29–30 November 2018) in New York City.

Biancamano, who at State Street is "focused on innovating new products and services based on cognitive and blockchain technologies, stated that among State Street's clients there was "a very high level of interest" in cryptoassets, but there was no need for his firm just yet to provide a crypto cutody solution for institutional investors since there was "no sense of urgency" on the part of their clients "to move into these assets right now." 

When asked whether the bank was building a crypto custody solution or acquire a firm that has already built such a solution, he said:

“We follow our clients’ assets. We do talk to our clients who are interested in doing this and we are looking at this very closely. But we are not putting a sign that we are opening for business. That said, we are a blockchain-friendly firm; we are very involved in the vertical.”

He also said that crypto custody was not just about cryptocurrencies:

"It’s not just about the current cryptocurrency; it’s also about tokenization and digitalization of traditional assets too.

On 25 January 2018, according to a report in Financial NewsRalph Achkar, another Managing Director for Digital Product Development and Innovation (for Europe, the Middle East and Africa) at State Street, this time one based in London, said that "although large investors were interested in the new assets," they were hampered by "market infrastructure, which lacks appropriate trading and post-trading arrangements." He went on to say:

"We are actively looking at servicing digital assets, like coins and their derived assets, based on the demand we are seeing from our institutional investors. As the asset base of our clients expands, we follow suit."

And in March 2018, in an interview with SiliconRepublic, State Street's Global Chief Technology Architect, Moiz Kohari, talked about the huge interest in his firm for blockchain technologies:

"I am spending a significant amount of my own time and my team’s effort in creating and managing blockchain technologies. So, to that effect, we analysed almost every single blockchain technology out there over the course of the last four to five years, and we were very early in engaging in this space. As a result of that... we have a significant portion of our team that are not only contributors, but maintainers of these projects in the open source community.

... we are creating some of our core back-end capabilities on top of these technologies, which we will start to bring to market over the course of the next 12 to 24 months. And, as we start to do that, you will start to see an evolutionary effect on the types of services we will be able to offer to our clients...

In short, there is a very significant investment that we are making in this space. But, to be very clear, it is completely different from anything that the current cryptocurrency market does and which operates in an anonymous network. What we are doing is creating and operating on top of a known network of participants."

Featured Image Courtesy of State Street Corporation

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.