Nadine Chakar was the founding head of State Street Digital when it launched in June 2021. The new division covers cryptocurrencies, central bank digital currency, blockchain, and tokenization with digital asset custody as one of its core offerings. News broke yesterday that Chakar is leaving, as first reported by Asset Servicing Times.

As a seasoned executive in both technology and custody, this is a huge loss for State Street, where Chakar has been for four years. Prior to that, he spent three years at Manulife and much of his career at BNY Mellon. Chakar is also an exceptional communicator, which is in particular demand as the digital asset sector requires significant education.

The move comes at a critical time on multiple fronts. For one thing, State Street is preparing to launch its digital asset offering next year. At SIBOS, Chakar talked about the ‘incredible demand’ from customers in the US and around the world, which is one of those good problems out there.

Regulators slow the pace of digital assets for banks

At the same time, however, the entire industry is facing hurdles from regulators that are slowing the pace of progress. That’s not just for crypto custody, but also for DLT tokenization initiatives that State Street spends 80% of its efforts on.

In the United States, the SEC requires banks to escrow all digital assets on their balance sheet, whether they are cryptocurrencies or tokenized conventional assets. And the proposed Basel III rules for crypto assets mean that banks will have to set aside a dollar of capital for every dollar of crypto held in custody, which is not a viable business model.

Additionally, the Basel III proposals include cryptocurrency caps, which would mean that large custodians like State Street would severely restrict the scale of their custody offerings. And for conventional asset tokenization, custody would also attract the 2.5% infrastructure risk add-on, which many consider a DLT tax.

The three main trustees, BNY Mellon, State Street and Northern Trust, wrote a combined response to the latest Basel III proposals.

At SIBOS, Chakar said, “If anything frustrates me, it’s the slow pace. Because it’s fun to do proofs of concept, but at some point, it would be nice to start implementing at scale and really transform the industry.”