The future of de-fi interoperability:
State Street and Taurus

Vassili Lavrov (VL): We are excited to collaborate with State Street. This agreement will enable State Street to leverage our fully integrated, custody (Taurus-PROTECT), tokenization (Taurus-CAPITAL) and node-management solutions (Taurus-EXPLORER) to automate the issuance and servicing of digital assets, including digital securities and fund management vehicles, in accordance with applicable institutional standards.

Over the last three years, Taurus evolved from the Swiss leader to a global leader in digital asset infrastructure for sophisticated financial institutions. Our reach is now international as we have opened more than 10 offices across the globe, including Paris, Frankfurt, London, Dubai and Istanbul, to be accessible to our clients and provide “follow-the-sun” support. To address the needs of our US and other North American clients, we’ve opened offices in Vancouver.

This is important, as our clients have a global footprint with different business units across Americas, Europe, the Middle East and Asia Pacific. As regulatory requirements can vary, we make sure that our platform deployment is as flexible as it can be. For example, we are able to deploy our digital asset platform across several jurisdictions on-premise to ensure full compliance with local regulatory requirements.

Zahid Mustafa (ZM): Exactly. Ultimately, we want to grow the capabilities of this technology. Not just at State Street, but at an industry level. Taurus’s recent global expansion has allowed us to effectively collaborate with them to serve our global client base. In particular, their ability to support the North American market with their presence in the same time zone as our clients there, is crucial. Because of this, no matter how much we scale with them, over different use cases, they’re present in all the regions we need them to be.

VL: We are collaborating closely with blockchain network Chainlink to address three main challenges on the tokenization front: security, data and asset mobility. The latter is what people refer to as cross-chain interoperability with the end goal to seamlessly transfer assets between public blockchains and/or permissioned blockchains. To do so, we have integrated Chainlink's Cross-Chain Interoperability Protocol (CCIP) and run a successful proof-of-concept around bridging US Dollar Coin across chains.

Early next year, we will launch a project that will change the way regulated financial institutions run tokenized businesses and operations. Our objective is to transform collateral management as we know it while streamlining operations and settling transactions near-instantly.

ZM: SWIFT is also making a significant move in coming up with tokenization use cases through their network, with cross-chain CCIP. Taurus’s existing partnerships and proofs-of-concept in cross-chain CCIP will be beneficial and can help us plug our SWIFT membership into our services with Taurus and take part in these global developments that bring industry participants together in an interoperable environment.

VL: A piece of infrastructure quite often overlooked by large sophisticated financial institutions is Taurus-EXPLORER, which combines node management plus blockchains indexing. Basically, nodes are what enable you to connect to either public or permissioned blockchain networks. Yet, running blockchain nodes at scale is expensive as it requires large headcounts to ensure that the nodes remain operational at any point in time. It can cost up to several millions of dollars per year (when adding public and private blockchains), while requiring to put in place all the right business continuity planning and disaster recovery processes. Indexing layers is also critical as it helps you with streaming data from the blockchains.

It is crucial for the technology provider to be future-proof by being “blockchain-agnostic”: One of our goals is to ensure that our clients, such as State Street, are able to custody any type of digital assets on any type of blockchains. In essence, we remove the blockchain technological complexity so that our clients can actually focus on what they do the best – creating value for their clients.

ZM: I would agree with this. Working with a technology provider like Taurus – who has these node management capabilities for their clients – gives us confidence that we’ll be able to scale across geographic jurisdictions. This enables us to seamlessly connect to third-party digital asset platforms in the market. It also enables us to offer funding mechanisms, through wholesale central bank digital currency (CBDC), tokenized deposits, etc., which can have connectivity to the asset and cash legs, using this blockchain connectivity.

VL: Our platform is digital asset-agnostic – it supports cryptocurrencies, tokenized assets and digital cash including tokenized deposits, commercial stable coins and CBDCs. Hence, when a financial institution collaborates with us, they can cover all the digital asset use cases with the same platform.

When it comes to digital cash, privacy and traceability are key considerations. We have been involved with the Bank for International Settlement (BIS) and its project Tourbillon, a prototype of a CBDC with unique privacy features, providing a level of anonymity comparable to that of cash. Taurus contributed to this project by reviewing its cryptography and security architecture, an opportunity extended to us by the Swiss National Bank, which championed this project.

ZM: The fact that Taurus has participated in BIS projects gives us confidence in their ability to focus on different use cases. In particular:

• A unified ledger where the asset and the funding/payment mechanism (e.g., wholesale CBDC or tokenized deposits) are on the same ledger
• A multi ledger, where the assets are on a digital ledger, while the funding/payment mechanisms as above are on different, non-digital ledgers, using dedicated cash accounts at financial institutions such as State Street, or at central banks, and leveraging existing SWIFT infrastructure
• A multi ledger where the asset and the funding/payment mechanisms are both on different distributed ledger technology platforms, where the asset division is operated by a digital platform operator and the cash division is operated by a public national competent authority, like a Central Bank (e.g., European Central Bank trials or other Central Bank initiatives)

VL: At Taurus, we have mastered the full technology stack: hardware, software, secure devOps, distributed systems, cryptography, etc. Indeed, we control both Hardware Security Module (HSM) and multi-party computation (MPC) technology. While the large majority of our clients use HSM signature mechanisms, we also released the world’s first open-source implementation of the state-of-the-art cryptographic protocol known as “CMP,” a MPC protocol that allows a number of distinct parties to collectively compute a digital signature (via elliptic curve digital signature algorithm) according to a quorum logic; in other words, what cryptographers call a threshold signature protocol.

Those capabilities give us full autonomy and can minimize friction in managing tokenized versions of non-native digital assets: trusted data feeds with oracles to bridge the digital and physical worlds.

For example, real-time updates about the underlying asset’s location, condition or ownership. That is why we have integrated Chainlink Data Feeds for market pricing, reference data and identity data, which provides crucial information about the asset's state or for facilitating transactions. We also added the support of Chainlink Proof of Reserve, which will help protect users from over-issuance risks and increase reserve transparency.

Non-technological components are also to be taken into account: Clear legal framework between the tokenized assets and its physical counterpart, audits and certifications with regular third-party verification, enhancing the trust in the asset-token relationship.

ZM: I think this goes back to the SWIFT point I made earlier. If they can connect as a plug-in to SWIFT and SWIFT is working with Chainlink, then I’ve got a link back to my existing platforms. Today, assets remain on many different digital platforms but need to be custodied on State Street’s books and records using cash or tokenized deposits. Using Taurus’s capabilities, we’d like to connect to different digital asset platform venues where we can custody those digitally native assets, using fiat or cash rails and wholesale CBDC.

At the moment, some digital asset platforms hold a lot of these assets but have not provided the capability for externalizing wallet management. As we continue to develop our digital services capabilities, we’re interested in how Taurus can enable us to custody those assets.