Global custodian bank, State Street, is changing its blockchain strategy, reducing a significant number of DLT development team.

According to sources familiar with the matter, globally renowned custodian bank State Street has shifted its strategy in the blockchain space, resulting in a significant reduction in related development personnel.

The revised strategy now focuses on digital assets such as tokenized stocks and bonds, rather than the previous heavy lifting of repositioning the front-end to the back-end using Distributed Ledger Technology (DLT).

As banks based in Boston face various cost pressures, significant streamlining has taken place within global blockchain teams over the past few weeks. An anonymous engineer mentioned that over 100 blockchain developers have been cut.

According to reports, State Street laid off about 250 IT workers last week as part of their plan to cut 2,300 jobs in the U.S. and other higher-cost regions this year.

Facing a decline in revenue this year, State Street has been cutting expenses. Initially announcing plans to lay off 1,500 employees, including senior management, in January 2019, the target was later revised to 2,300 in July. State Street spokesperson Brendan Paul stated that some of the layoffs occurred in Boston and mentioned in a statement:

This action simplifies our IT organization and removes unnecessary layers that have been hindering our overall success. Through these changes, we will ensure our culture of innovation is more focused on achieving our strategic goals in the short and long term.

It is now known that State Street is moving away from large internal DLT projects and is leaning more towards digital assets, stablecoins, traditional custody, and the USC project.

The USC project is a utility settlement coin developed by a consortium of banks called Fnality.

However, Ralph Achkar, the Digital Product General Manager in London, stated that this streamlining should not imply that State Street is not focusing on distributed ledger technology but rather is a means to be cost-effective, and DLT is still relatively in development within the company.

The Innovator's Dilemma

Previously, a large DLT team at State Street was using the open-source permissioned blockchain software, Hyperledger Fabric.

The objective of this team was to create a single ledger that could run State Street's investment book at the front-end, record an accounting entry in the middle, and run a trade ledger. This new DLT system would eliminate the need for coordination among hundreds of databases, reducing hundreds of man-hours involved daily.

However, the bank now describes its approach as unrelated to the ledger and relies more on external vendors.

Currently, most large banks face similar challenges as State Street in figuring out the best way to upgrade legacy systems. When systems control over $30 trillion in asset flows, digital transformation doesn't happen overnight. Integrating blockchain into traditional finance requires a significant amount of manpower and resources. Ralph Achkar, the Digital Product General Manager in London, further added:

I think the choice that's getting close to an answer is, do we need to have all of these resources internally, or can we truly build partnerships and work with other providers in the market?

DLT Startups

Moiz Kohari, the former Global Chief Technology Architect who left State Street in April, co-founded the DLT-based data privacy startup, Manetu.

According to their website, Manetu has so far hired Greg Haskins, former Senior Vice President at State Street, as Chief Technology Officer; Conor Allen, former Senior Vice President of Enterprise Data, as the Product Lead; and Binh Nguyen, former Managing Director, as Chief Scientist. Kohari mentioned:

There are other bank employees behind the scenes that I'm not willing to disclose, some of whom are maintainers of the Hyperledger project.

Further Reading

• World Trade Organization: A Bright Future for Blockchain
• Exploring Blockchain Big Data Companies – Is It a Lucrative Business?

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