With the June launch of our State Street Digital^SM business, we took a major step forward in realizing our vision of operating the industry’s most efficient digital market infrastructure, built to help our clients grow and thrive in the new digital economy.

With State Street Digital, we are building on our history of innovation and a strong foundation in the digital services space to support clients’ needs across a full spectrum of digital assets and new platforms, including digital cash, cryptocurrency, central bank digital currency (CBDC), stablecoins, smart contracts, blockchain, and other distributed ledger technologies, as well as tokenization.

LAYING A STRONG FOUNDATION

The investment industry’s adoption of digital assets and cryptocurrency is creating significant investment opportunities and the potential for disruption. As the regulatory and risk landscape begins to crystalize, the digitization of assets and the electronification of transactions and workflows require new market infrastructure and solutions. State Street Digital is focused on meeting these needs.

We are strengthening our core banking operations by digitizing manual processes, and building on State Street’s strength and security to develop digital market infrastructure solutions for institutional investors.

Our major focus is on establishing a State Street digital wallet that will enable our clients to custody their digital assets in combination with their traditional assets directly with State Street.

We are also developing new platform capabilities to offer superior security administration capabilities (such as ETF services) and support the financing of our clients’ digital holdings. And we are complementing our digital asset servicing with digital trading and liquidity management, as these functions will be in high demand in a digital asset marketplace.

To continuously upgrade and adapt our product offerings as these new markets evolve rapidly, our digital team is focused on ensuring long-term control of key infrastructure providers of our core services, by contemplating a path to control through strategic investments and partnerships.

We are excited about the wide range of digital initiatives underway and we were proud to be named “Digital Asset Custody Initiative of the Year” by the Asset Servicing Industry Excellence Awards in 2021.

ADVANCING OUR DIGITAL TRADING AND LIQUIDITY CAPABILITIES

At the heart of State Street Digital solutions is our proprietary GlobalLink technology platform. GlobalLink brings together the trading and liquidity infrastructure our clients need with digital custody and tokenization capabilities.

In March, we expanded our Fund Connect ETF digital platform, an integral component of the GlobalLink product suite. By opening the platform to all ETF issuers, authorized participants, and order takers, we are better prepared to support clients’ end-to-end needs, from semi-transparent to crypto exchange traded products (ETPs).

The launch of our GlobalLink FX trading technology platform, announced in November, combines our powerful execution and post-trade platforms (FXConnect, Currenex, and TradeNeXus) into a single, integrated execution and workflow solution. The platform is designed to deliver sizable benefits to our clients such as an improved price discovery solution for FXConnect buy-side clients: FXConnect Market Monitor.

This enhanced tool will continue to leverage streaming price feeds and market data to give clients a curated view of their liquidity providers, driving improved decision-making and execution outcomes. Currenex, for example, not only handles FX and fixed income, but also bridges fiat and crypto markets.

We also continued to expand our BestX transaction cost analysis platform that helps clients drive enhanced execution outcomes and provides transparency and insights into their trading process. BestX developments in 2021 included the addition of equities and digital capabilities to our FX and fixed income offering.

Our GlobalLink platforms are key to us forging ahead as we grow and enhance our peer-to-peer strategies, which help create new liquidity venues for our clients and investors worldwide. We started with a peer-to-peer repo marketplace, and will move into different asset classes to give clients a stepping stone into digital finance.

UNLOCKING THE NEW DIGITAL ECONOMY

Tokenization is opening many doors as it democratizes global investing. By turning any asset into a digital asset — including a fractionalized portion of an asset — it becomes more accessible to investors, more easily traded, and instantaneously settled. We believe we have an opportunity, because of our scale and robust risk frameworks, to help clients leverage tokenization capabilities and access these new pools of assets in a responsible way as they look to take advantage of the benefits they offer.

Expanding client reach, accelerating distribution speed, and reducing counterparty risk through frictionless settlement and instantaneous collateral movements are just some of the opportunities on offer. Just as importantly, tokenization promises to unlock trapped liquidity in asset bases such as private equity, private credit, real estate, or other tangible assets that are otherwise simply sitting on the books until they are sold.

State Street Digital is currently developing tokenization-as-a-service capabilities to provide our clients access to these efficiencies in key segments such as private markets and funds as regulatory conditions allow these new liquidity opportunities.

CULTIVATING KNOWLEDGE FOR THE DIGITAL AGE

The digital economy is changing what our stakeholders need to know to succeed in tomorrow’s financial markets. As digital assets become more prevalent, education becomes more essential.

Our 2021 Digital Finance Survey revealed that while more than half of those surveyed (56 percent) expected cryptocurrencies to be a common feature of modern portfolios, few respondents admitted to having detailed knowledge of the technology and concepts that underpin digital assets.

We are committed to working with clients, regulators, vendors, and our colleagues to provide a clear understanding of the challenges and opportunities that the digital economy presents.

Asset managers want to know whether cryptocurrency fits their investment profile and, if so, which cryptocurrency to select, which benchmarks to follow, and how to address trading, accounting, and other infrastructure — how to merge the old with the new. Through our State Street Associates market research team and our new academic partnership with Antoinette Schoar at MIT, we are providing clients with deep insights into developments in the digital marketplace.

Finally, we are developing and recruiting talent. We are implementing measures to upskill our broader organization, making sure employees understand not only how these new capabilities support our clients’ success in digital markets, but also how we are leveraging the underlying technology enhancements to simplify and strengthen our own processes — so we work smarter.

BUILDING THE FUTURE OF FINANCE

State Street has always been at the leading edge of what is next, and that is what our clients expect of us. We see digital assets as the next wave of efficiency and long-term value that will only continue to grow as a transformative force for the financial industry.

We are making the investments to give our clients clarity in an increasingly digital world. The fast-changing pace and ever-shifting landscape of digital assets is overwhelming for many investors and asset owners. The work ahead for State Street Digital is all about simplification for our clients, to help them more seamlessly identify, manage, and leverage digital opportunities.

Our primary goal is to be a scalable, secure digital institutional custodian — to redefine, in fact, what it means to be a global custodian. We will achieve this by deploying the best digital platform, introducing differentiating elements along the value chain, and using our reach to influence the outcomes around tokenization and the digitization of assets. We can accelerate growth by helping our clients bridge the gap between the industry of today and the one of tomorrow.