Dive Brief:

• State Street has agreed to let London-based infrastructure provider Pure Digital use the bank’s trading technology to create a cryptocurrency trading platform expected to go live in mid-2021, the tech company announced Thursday.
• The idea is to transpose the infrastructure State Street’s Currenex platform uses in foreign exchange and apply it to the crypto space via a bank-led consortium, Pure Digital CEO Lauren Kiley said in a press release.
• "Big asset managers want to get involved in cash cryptocurrency markets and banks want to act as conduits," Pure Digital founder Campbell Adams told the Financial Times. "We are hoping to bring the two sides together."

Dive Insight:

Even though State Street is lending its technology to the effort, it hasn’t committed to using the final product. David Newns, global head of execution services for GlobalLink at State Street Global Markets, told CoinDesk the bank is "evaluating" trading on the finished platform.

Kiley, meanwhile, said the bank has agreed to "explore the digital asset space" with Pure Digital, adding, "We’ve got a couple of banks that have signed with us and several others in the pipeline."

However slightly, State Street becomes the latest in a string of asset managers to lean into crypto. BNY Mellon in February said it is developing a client-facing prototype for a platform that would allow the bank to hold, transfer and issue cryptocurrencies. Goldman Sachs revived its cryptocurrency trading desk last month and said it would begin offering Bitcoin futures and other products to clients. Meanwhile, Morgan Stanley said it would let its wealth-management clients access three investment funds that enable ownership of Bitcoin. And Northern Trust in December said it was partnering with Standard Chartered’s fintech investment unit, SC Ventures to launch a U.K.-based cryptocurrency custodian for institutional clients.

"Banks are telling us that they can’t ignore client demand for crypto assets and they realize it’s a market they need to get into," Kiley told the Financial Times.

Banks’ surge in interest in the crypto sphere follows an eightfold jump over the past year in the value of Bitcoin, arguably the world’s best-known digital asset. But the space still needs to mature, Adams told CoinDesk.

"It needs large-balance financial institutions involved in the manufacturing process of price," Adams said. "The primary market doesn’t really exist. There’s a lot of disparate exchanges out there with different rules of engagement and systems. And this manifests itself in very fragmented market data."

Pure Digital is building an over-the-counter offering with bilateral credit lines and full transparency, so banks can monitor risk and turn counterparties on and off at will, Kiley told CoinDesk.

"Either [banks] find a way to get involved and provide services to meet client demand or they will start to lose relevancy over time," Kiley said.