State Street Corporation, the Boston-based banking and investment management giant, is considering creating its own stablecoin and deposit token to facilitate blockchain-based transactions, according to a report from Bloomberg, citing anonymous sources.
The asset manager sees major opportunities in the growing crypto and digital asset space and is exploring blockchain technology for payment settlements.
As reported, the deposit token will represent customer deposits on the blockchain. However, to launch a deposit token, State Street would first get approval from U.S. banking regulators.
Apart from its stablecoin consideration, State Street is looking to join digital cash consortiums. The company is also leveraging its investment in Fnality for settlement options.
The Majors Are Coming In
Fnality is a DLT (distributed ledger technology)-based payment system and blockchain initiative backed by major financial institutions like Banco Santander, BNY Mellon, and Barclays.
All are part of State Street’s strategy to use blockchain technology for payment settlements, though they would not be the company’s first exposure to cryptocurrency.
Previously, State Street, Digital Product Development & Innovation, said the firm was working to offer custody services for “blue-chip” cryptocurrencies like Bitcoin and Ethereum, in partnership with Copper.co.
The firm also seeks to build out crypto trading capabilities to enable capital-efficient trading of digital assets for its clients.
Last month, State Street Global Advisors, the asset management arm of State Street, reportedly filed to launch a crypto-focused ETF in partnership with Galaxy Digital. The ETF will invest in crypto companies as well as spot and futures-based crypto ETFs.
In addition to cryptocurrency products, State Street has shown interest in tokenization and central bank digital currencies (CBDCs). State Street is working with central banks on their CBDC initiatives, aiming to help build the institutional payment infrastructure of the future.
The firm makes investments in Securrency, focusing on developing various tokenization solutions for traditional assets.
Stablecoins Gain Traction
The stablecoin market has become highly lucrative, attracting interest from both cryptocurrency entities and traditional financial firms.
Earlier this year, Ripple announced plans to launch the RLUSD stablecoin, which will be pegged to the US dollar. It will be backed by a combination of US dollar deposits, short-term US government bonds, and other cash equivalents, according to Ripple.
With the upcoming product, Ripple aims to enhance DeFi applications and provide a more stable asset solution in the XRP Ledger ecosystem. The firm plans to launch RLUSD on the XRP Ledger and the Ethereum blockchain later this year.
Digital payments giant PayPal has offered its own US dollar-backed stablecoin called PayPal USD (PYUSD). Issued by Paxos, the issuer of stablecoin Binance USD (BUSD), PYUSD is aimed at facilitating payments and transactions within PayPal’s ecosystem.
JPMorgan, one of the largest banks in the US, has also developed its own stablecoin called JPM Coin. However, JPMorgan has not yet publicly listed or made JPM Coin available for external use. The digital solution is currently used internally by the bank for instantaneous payments between its institutional clients.
While many entities ramp up to foster their stablecoin offerings, the legal landscape for stablecoin remains uncertain.
Plus, the coming launch of Ripple’s RLUSD has faced some regulatory roadblocks, with the U.S. Securities and Exchange Commission (SEC) claiming in a legal filing that the stablecoin is an unregistered cryptocurrency.
The SEC recently withdrew its investigation into Paxos and said it would not pursue legal action against BUSD. The decision came after a court ruling dismissed the SEC’s securities claims against BUSD in the Binance-SEC case.
Ripple said it is moving forward with plans to launch its RLUSD, despite facing some regulatory challenges, as it seeks to expand its presence in the rapidly growing stablecoin and decentralized finance markets.
Once debuted, RLUSD will compete with other major stablecoins like Tether’s USDT and Circle’s USDC in the growing $150 billion stablecoin market.
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