State Street Steps into Digital Asset Trading with Pure Digital Deal
Posted by Colin Lambert. Last updated: April 8, 2021
It has been a long journey with a few inevitable bumps in the road, but the Pure Digital project – which was effectively born out of what was initially the Pure FX project – is nearing fruition. Puremarkets, the umbrella firm for Pure Digital, has entered into an agreement with State Street’s Currenex for the latter to provide the trading infrastructure for Pure Digital’s new wholesale digital currency trading platform. Additionally, State Street has confirmed it will explore the digital asset space as part of the Pure Digital initiative, along with its banking peers.
On offer will be a fully automated, high throughput OTC market for digital assets and cryptocurrencies with physical delivery and bank custody. Institutional participants will trade on the platform utilising bilateral credit enabling efficient capital utilisation and control for all trading participants.
The platform will be multi-custodial and trading participants will be free to leverage their preferred digital asset custody solutions and manage risk through a smart custody routing mechanism.
“This is a big step forward,” says Campbell Adams, founder of Pure Digital. “We are establishing a robust market place for price discovery and the exchange of risk.
“We have explored many ways to build the infrastructure, including our own technology, but we feel this is the way forward,” he continues. “State Street has invested in the digital space as an institution and shares our vision for digital assets, while Currenex has the connectivity framework in place.”
David Newns, global head of execution services for GlobalLink, State Street Global Markets, adds, “Currenex is thrilled to leverage our experience and expertise in the FX and digital asset trading marketplace to provide Pure Digital with robust technology and infrastructure for this exciting digital currency trading initiative.”
The partnership does make sense given the ambitions for the Pure Digital platform, which are firmly focused on the institutional, specifically bank, space. Adams observes that a lot of the people that he engaged with over the Pure FX project several years ago are now equally engaged over the prospects for digital assets trading. “We have all the infrastructure in place,” he says. “The middleware, the matching, the market data – we are seeking to make this as easy as possible for the banks to connect, be it as a trading counterparty, a prime broker or a custodian.”
This is a scalable project, whatever clients want to trade in the digital space we can support it, be it existing cryptocurrencies, stablecoins or central bank digital currencies
The timing would also appear to be propitious, with more banks publicly embracing the concept of digital assets – something that is not lost on Lauren Kiley, CEO of Pure Digital. “Banks and institutions are expressing genuine interest in the digital assets space every day,” she says. “They are looking to get more involved but they need the right venue to do so. Our model gives the banks a degree of governance over the project which makes it the perfect platform for them to grow into digital assets as a community.”
Although, inevitably, bitcoin will be one asset traded on Pure Digital, Kiley is keen to stress that it is about much more than that. “The volume of interest in bitcoin means it is inevitable that we will support trading in it, but this is a scalable project, whatever clients want to trade in the digital space we can support it, be it existing cryptocurrencies, stablecoins or central bank digital currencies.”
Looking ahead, gaining critical mass for the project will, as is always the case with trading venues, be critical. The firm is hopeful of being in live trading in the middle of this year and can start building from there. One advantage Pure Digital may be that banks can connect as service providers, or conduits, to the market without having to allocate their own trading risk capital. Inevitably, though, there will be banks keen to explore trading opportunities in the digital space.
As they come on board, banks will probably find there is a familiar feel to Pure Digital, for as Adams says, “We have built a platform that is bank grade, focused exclusively on institutional traders, with minimum trade sizes. There will not only be a familiarity with the technology infrastructure, but also with participant behaviour. The FX market structure is a good fit for the digital assets world, therefore it makes sense to enter a new asset class in this way.”