State Street, the prestigious global custodian overseeing $44.3 trillion in assets, has strategically chosen Taurus, a specialist in cryptocurrency custody and tokenization, to enhance its digital asset offerings. This collaboration comes as State Street anticipates a more favorable regulatory environment in the United States.

Initially, the bank plans to launch tokenized versions of traditional assets, with announcements regarding their first client to follow soon. Despite its inherent role as a custodian, State Street has faced challenges due to the Securities and Exchange Commission’s (SEC) proposed Staff Accounting Bulletin 121 (SAB 121), which imposes stringent capital requirements on entities holding customers’ crypto assets.

Donna Milrod, State Street’s Chief Product Officer and Head of Digital Asset Solutions, has been vocal about the need to reform SAB 121. This regulation could compel banks to reserve excessive capital to cover potential risks associated with holding crypto assets. Milrod emphasized, “Our initial focus is on tokenization, but that is merely the beginning. Once regulatory conditions in the U.S. become more conducive, we will expand our services to include digital asset custody. Our expertise lies in custodianship, and we manage these assets off-balance sheet.”

Lamine Brahimi, Co-Founder and Managing Partner of Taurus, highlighted the advantages of tokenization, including continuous trading and improved collateral management. He also stressed the necessity for a more progressive regulatory framework in the U.S. “I am confident that this alliance with State Street will signal a positive shift for U.S. financial markets, which have lagged behind their European counterparts due to SAB 121,” Brahimi remarked.

Also, read – Bitcoin Mining Profitability Reaches Historic Lows in August Amid Rising Hashrate

State Street’s extensive experience in blockchain technology and digital assets includes a prior partnership with crypto custody firm Copper, which recently redirected its focus from custody services to its ClearLoop settlement system.