BNY Mellon joins State Street in targeting crypto trading by backing Pure Digital

Two of the world’s largest custodian banks have publicly backed cryptocurrency trading platform Pure Digital, a move that signals growing demand for bitcoin and other digital tokens among traditional asset managers.

Bank of New York Mellon has joined a consortium of six banks that will support the launch of London-based Pure Digital, three months after State Street first announced its support for the planned cryptocurrency exchange.

In early April, State Street announced plans to start trading cryptocurrencies in the middle of this year and participate in the construction of a new bank-level digital asset trading platform. State Street is the second largest bank in the United States, managing $3.1 trillion in assets. Its Currenex trading technology division is working with London-based Pure Digital (an infrastructure provider in the foreign exchange trading field) to build an institution-centric digital currency trading platform. The two companies said that as they further explore the digital asset field, Pure Digital and State Street expect to start cryptocurrency trading in mid-2021.

The latest move by BNY Mellon is further evidence that conservative custodians, which protect assets for some of the world’s largest money managers, are responding to growing client interest in digital currency trading.

“We’ve talked to all the top banks, but we think the custodian banks were among the first to notice this need, so they’re more advanced now,” said Lauren Kiley, CEO of Pure Digital.

BNY Mellon’s latest move to support Pure Digital comes as Bitcoin has suffered massive losses for weeks, wiping out all of its gains this year and dropping below $30,000 for the first time since January.

BNY Mellon said it would “explore new digital asset servicing solutions for our clients as the regulatory landscape evolves.”Both BNY Mellon and State Street plan to trade on the cash platform while also providing other services such as technology.

“Digital assets will only become more embedded in global markets in the coming years, and this collaboration fits in with BNY Mellon’s broader strategy to develop digital asset capabilities for clients across the entire trading lifecycle,” said Jason Vitale, global head of FX at the U.S. dealer.

Custodian banks, historically not often associated with risk and innovative markets, have quietly moved into digital assets in recent months, even ahead of some of the more adventurous investment banks.

BNY Mellon launched a digital unit in February that will hold and transfer bitcoin and issue other cryptocurrencies on behalf of its asset management clients. The digital asset custody platform will go live later this year.

State Street Bank made a similar announcement in June, announcing the establishment of a new digital financial department, State Street Digital, which will be led by Nadine Chakar, executive vice president of State Street Bank, and focus on cryptocurrency, central bank digital currency, blockchain, DeFi and other fields. Ron O'Hanley, chairman and CEO of State Street Bank, said that the financial industry is transforming to digital finance. We believe that digital assets are one of the most important forces affecting our industry in the next five years. Digital assets are rapidly integrating into the existing financial services framework. We must have the right tools to provide customers with solutions that meet their traditional investment needs and growing digital needs.

It follows that both banks are now looking to expand their capabilities from custody to trading.

Campbell Adams, co-founder of Pure Digital and a currency market “veteran,” said the first trade would take place on its platform “within a week” and would involve a bitcoin transaction.

Dmitri Galinov, CEO of trading platform 24 Exchange and former head of currency trading platform FastMatch, announced on Tuesday that his platform has been awarded a license by the Bermuda regulator.

Pure Digital will become the first bank-powered cryptocurrency exchange. Bank of New York Mellon, State Street and other unnamed banks behind the project will create a cash-to-cryptocurrency trading platform in an effort to compete with larger incumbents.

Major banks started late in the field of crypto trading, which is dominated by companies without traditional financial market backgrounds such as Coinbase and FTX. It is worth mentioning that FTX announced on Tuesday that it had completed a $900 million Series B financing round, with more than 60 investors including Sequoia Capital, SoftBank, Paul Tudor Jones Family Office and Circle participating in the investment, with a post-investment valuation of up to $18 billion.

“We are not worried about aligning with banks,” Adams said, adding, “The crypto market needs banks, and in my opinion, the space will not be able to expand without them.”