State Street, the world's second largest custodian bank, has assets equivalent to 10% of global assets. How it views the creation, trading, service and custody of future financial instruments is a question closely watched by financial market observers. State Street Bank has US $ 33.9 trillion in custody assets and manages US $ 2.7 trillion in assets. It operates in more than 100 regions around the world and has more than 38,000 employees worldwide.
In December 2019, Jay Biancamano, State Street's U.S. digital asset director, provided Forbes with his views on the future of digital assets.
Given the mixed sentiment from the Bank of England to the market earlier this month, this was considered a timely discussion; on the one hand, it announced the cessation of a large distributed ledger project and on the other hand it signed with the cryptocurrency exchange Gemini Cooperation agreement.
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In this broader context, Jay first explained how State Street Bank was able to adapt to these developments and how to make the internal blockchain organization more mature.
"We are becoming more business-centric, not just for the technology itself. We no longer believe that any proof of concept is successful. Whatever the outcome, learning itself is valuable, but it must be taken commercially action."
Focus on customer needs
Jay said, "In the end, everything has to be customer-oriented. That's why we didn't get involved in Bitcoin, maybe there was no real customer demand at that time." Now it's time to try the blockchain plan as a starting point. Already.
Gemini is such a crossover, it combines its Gemini Custody services with State Street's back-end reporting capabilities to provide customers with a consistent reporting experience in both organizations, marking the beginning of digital assets' integration into existing financial structures serving.
However, customer-oriented does not necessarily mean that State Street Bank only obtains demand from customers, but rather combines market development with customer needs through effective business methods to promote market development. When talking to Jay about blocks In the future of the chain, there are five related topics as follows.
1. The role of private money : The role of the emerging private money market, which the bank sees as one of the main areas where digital assets will play a role in the coming years.
2. Improve asset liquidity: Blockchain brings liquidity to asset classes with few transactions or assets that do not belong to traditional investment portfolios (such as real estate and IP).
3. Convergence of asset classes and the emergence of multi-asset trading: With highly configurable digital financial instruments, they can be cut into smaller pieces to create new financial instruments.
4. Asset Intelligence and Data: As assets are digitized, assets become easier to trade and transparent, which opens up a new data stream and enables companies to boost AI development.
5. Enable Blockchain Exchange Traded Funds: Blockchain has the potential to improve fund management and trading methods.
The role of trend one private currency
Private capital is growing much faster than public capital and offers unique opportunities for digital assets that directly connect investors with investment. The dramatic growth in global private capital, led by sovereign wealth funds, private equity promoters and family offices, means that companies have plenty of room for private funding sources.
Jay believes that if investor regulations are relaxed, the supply of this money will only increase.
"The SEC announced that it is seeking to expand the definition of qualified investors, which for me means that the private money market will have more liquidity."
Although shares and debt have mature and orderly “electronic” market infrastructure, private transactions are often customized and shrouded in physical notes, and digital assets have the potential to bring orders to this market. Digital assets have the potential to bring order to this market. Liquid assets that are more standardized and easier to pass through the capital market infrastructure will attract more liquidity.
Trend two: increasing asset liquidity
The market size of illiquid assets is large, including any asset that is valuable but not easy to buy and sell. This scale is very large and can be comparable to the size of global stock markets.
However, illiquid assets can be a problem for investors. Jay said that liquidity is very important to the idea of mutual fund investment because the SEC places restrictions on weaker liquid asset allocations, which is why it is not available in mutual funds. Reason for credit.
With digital assets, you can digitize and standardize illiquid assets, and create an investor market where you can meet issuers and turn them into liquid instruments. For example, in the field of art, painting can be divided into multiple digital rights, which can then be distributed and resold to form an orderly market and increase price transparency.
The convergence of three asset classes and the emergence of multi-asset trading
Today, with the digitization of assets, different types of assets are traded in different ways, with independent trading teams, venues and systems. With the digitization of assets, their access and transaction methods will be unified, thereby greatly improving the transaction efficiency between different assets.
Jay points to an example of transferring between asset classes: "Assuming you move between fixed income and stocks, and they trade very differently, you will have a lot of trouble in the process. In the future, all these financial instruments You can trade in the same way, and the possibility of global trading is 24 * 7 ”.
"We have seen this in the last wave of modernization. This is a historic precedent. Please consider all the ways in which public stocks were traded in the past, including over-the-counter, over-the-counter, market makers and public markets. But now, everything has changed and a lot has disappeared. "
In addition, the assets themselves will gradually deform, so that the distinction between stocks and bonds will start to blur.
Trend Four Asset Intelligence and Data
With the digitization of assets, you can obtain a wealth of information about demand and supply and historical asset performance, which can give financial institutions a leading edge to generate excess returns, namely Alpha.
Jay reminded me: "When you get transparent data about how assets are traded, it means that you can start automating transactions on that digital asset, just as transaction cost analysis makes benchmarks appear, financial services are essentially a Data games, just as pricing has led to the rise of algorithmic stock trading. "
This is a key element of State Street's strategy to push aggregated data about assets directly to the desk of investment managers. Earlier in March 2019, the company bought Charles River, a front-end to back-end customer service platform, for $ 2.6 billion, providing State Street Bank-backed desktop services to the offices of thousands of investment managers.
With Charles River, State Street has a platform on which it can provide data for new digital assets in the future, while also having the ability to actually invest in these digital assets, making the bank superior to sellers in terms of buyer institutions mechanism.
Trend five enables blockchain exchange traded funds
More and more fund managers want to automate their business through blockchain. Franklin Templeton, Pioneer, WisdomTree, and US Commodity Fund LLC are all committed to digitizing their fund operations. "ETFs have the upper hand in many places, so we focus on this, for example, what does fund management mean for digital assets?" Jay said.
Although the blockchain industry is still a long way from the realization of the world envisaged by Jay, Jay is still optimistic. He said in a recent video: "We have seen assets start to digitize. Although it is a trickle, we believe This will have a flood-like impact someday. "
The original text is from the English version of Forbes. The author is Forbes contributor Ben Jessel. The Chinese is compiled by the Bluemountain Labs team. The English copyright belongs to the original author. For reprinting in Chinese, please contact the compiler.