State Street expands tokenization push as banks rush to bring cash and funds onchain

State Street is expanding its digital-asset strategy, developing tokenized versions of traditional funds and cash products as large banks increasingly move core financial plumbing onto blockchain rails.

The custody bank is building tokenized money-market funds, exchange-traded funds, and cash instruments, like tokenized deposits and stablecoins, according to a Thursday release.

The effort builds on State Street’s existing role servicing crypto markets, where it already provides administration and accounting for crypto exchange-traded funds and last year signaled 2026 plans to expand into digital-asset custody.

Rather than launching crypto-native vehicles, State Street is positioning tokenization as an upgrade to familiar investment structures. The bank plans to work with institutional money managers and clients alongside its asset-management arm, which last month partnered with Galaxy Digital on a tokenized private liquidity fund.

The push comes as custodial banks accelerate efforts to digitize cash itself.

Earlier this month, BNY Mellon activated a tokenized deposit service designed for payments, collateral, and margin use, creating blockchain-based representations of bank deposits that remain direct liabilities of the issuing bank rather than stablecoins.

Other top asset managers are making similar moves. This week, Franklin Templeton updated two institutional money-market funds to support blockchain-based settlement and ownership records, allowing traditional cash vehicles to plug into tokenized and regulated stablecoin frameworks without changing how the funds are managed or regulated.

State Street has previously pointed to rising institutional demand for these changes. In an October 2025 research report, the bank said nearly 60% of institutional investors planned to increase digital-asset exposure, with many expecting meaningful portions of portfolios to become tokenized over time.