Global Custody Pro - 23 May 2025

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📰 Welcome to the Newsletter

Welcome to Global Custody Pro! I'm Brennan McDonald, Managing Editor. I write about the global custody industry after 12+ years in financial services, including working at a global custodian. The audio version of this newsletter is read by an AI voice. Have feedback? Just reply to this email or connect with us on LinkedIn.

📠 Editor’s Comment

This week, I've been contemplating stablecoins. The global cross-border payments world is currently navigating its migration to ISO 20022 MX messaging. A significant deadline looms in November 2025, when cross-border flows will transition to MX, following several years of successful MX adoption by RTGS systems.

The payments ecosystem intersects with the global custody world in numerous ways – client payments, FX, trade settlements, rebalancing, and corporate actions. Yet, the number of intermediaries involved in some payment flows is ripe for a process redesign.

The challenge for stablecoins is that their design almost seems "too simple" to integrate seamlessly into the complex processes of a global custodian, unless they are utilised internally on proprietary payment rails. JPMorgan is arguably the most advanced in this space with its Kinexys product, but its volumes remain modest within the broader context of daily cross-border payments, which amount to trillions of dollars.

Regulatory frameworks are crucial here. The EU's Markets in Crypto-Assets (MiCA) regulation has, in effect, handed dominance in the stablecoin market to US dollar-denominated issuers. Over time, if adoption increases, the comfortable payment, net interest income, and FX revenues currently enjoyed by bankers will likely face pressure. However, given the considerable challenges associated with the ISO 20022 migration, I suspect this widespread adoption is still a long way off.

Table of Contents

• 📠 Editor’s Comment

• 🌏 Global Custody News

  • SEC Commissioner Warns of "Regulatory Jenga"

  • ESMA Consults on MiFID II Retail Investor Rules

  • Sumitomo Mitsui Trust Group Hits Record Profit

• 🚀 Digital Asset News

  • Apex Group Secures Majority Stake in Tokeny

🌏 Global Custody News

SEC Commissioner Warns of "Regulatory Jenga"

• Driving the news: SEC Commissioner Caroline A. Crenshaw, speaking at "SEC Speaks" on May 19, 2025, cautioned that recent agency actions are "chipping away at decades of our own work," likening it to a "game of regulatory Jenga" that could destabilise markets. She stated, "My remarks today offer a word of caution as the agency chips away at decades of our own work – and, at the same time, as we stare down alarming market volatility, emerging risks, and calls for deregulatory action in all corners of our markets."

• The stated implications include a weakened institutional integrity at the SEC, with a nearly 15% staff loss diminishing expertise crucial for market oversight and crisis prevention. Commissioner Crenshaw questioned, "is our capacity sufficient today to prevent a future crisis, or aid in the recovery from one?"

• Commissioner Crenshaw warned that diluting laws through guidance without due process, failing to enforce existing laws, particularly concerning crypto-assets, and ignoring significant risks in crypto and the private markets could leave retail investors and small businesses most vulnerable, potentially leading to a crisis reminiscent of 2008. She stated, "If we continue down this path, eventually, the carefully constructed tower of regulatory blocks will tumble – leaving the door open to the same types of misconduct that we have spent decades irradicating."

ESMA Consults on MiFID II Retail Investor Rules

• Driving the news: The European Securities and Markets Authority (ESMA) issued a Call for Evidence (CfE) on 21 May 2025, to gather stakeholder input on the retail investor journey and the impact of MiFID II regulatory requirements. The CfE aims to assess if current rules effectively support investor protection while ensuring accessibility, or if they create unintended obstacles, particularly concerning disclosures, suitability, and appropriateness assessments. Comments are invited by 21 July 2025.

• The big picture: The stated purpose of gathering this evidence is for ESMA to "assess whether specific regulatory adjustments or clarifications may be needed based on the evidence gathered to enhance both investor protection and retail engagement in financial markets" in Q3 2025. Such an assessment signals potential future modifications to MiFID II requirements that impact investment firms and credit institutions subject to the directive.

• Go deeper: ESMA's inquiry focuses on whether elements like disclosures (e.g., costs and charges, product risks), suitability, and appropriateness rules are effective or "may create unintended obstacles for retail investors", especially within a "digitalised investment environment". The CfE also seeks input on non-regulatory barriers to participation and the factors driving younger investors towards speculative assets.

Sumitomo Mitsui Trust Group Hits Record Profit

• Driving the news: Sumitomo Mitsui Trust Group (SMTG) posted record net income of ¥257.6 billion for the fiscal year ended March 31, 2025, up 225.3%, with record net business profit of ¥362.0 billion. Key March 2025 Assets Under Custody/Administration (AUC/A) figures included ¥206.5 trillion in domestic AUC (SuMiTB entrusted) and USD 427 billion in overseas global custody AUC. Growth in trust-related businesses, including asset administration, boosted profits, with Investor Services net business profit up ¥20.3 billion to ¥83.1 billion.

• The big picture: SMTG's large-scale client asset book and custody/administration balances highlight its significant operational footprint in Japanese institutional services. This scale directly supports the robust fee income that fuelled record profits, showcasing growing earnings from core trust and asset servicing activities.

• Go deeper: SMTG projects further growth in FY2026, forecasting net income of ¥280.0 billion (up 8.7%) and net business profit of ¥370.0 billion. An increased dividend of ¥160 per share is planned for FY2026, alongside a ¥30.0 billion share repurchase program.

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🚀 Digital Asset News

Apex Group Secures Majority Stake in Tokeny

• Driving the news: Apex Group has acquired a majority stake in Tokeny, the enterprise-grade tokenisation solutions provider, with plans for 100% control within three years, building on a December 2023 partnership. "Tokenisation is a foundational shift in how assets will be managed, distributed, and accessed," according to Peter Hughes, Founder and CEO of Apex Group; Tokeny's talent, technology, and its ERC-3643 compliant tokenisation standard, used for over $US32 billion in assets, will be integrated.

• The acquisition enhances Apex Group's ability to deliver comprehensive, future-proof tokenisation solutions, aiming to simplify and accelerate clients' shift to greater asset liquidity and distribution. Tokeny's capabilities in the issuance, transfer, and lifecycle management of tokenised securities are stated to enable clients to access new liquidity channels and improve operational efficiencies.

• Apex Group views this acquisition as a foundational step in its strategy to lead asset servicing transformation using Web3 technologies for enhanced efficiency, security, and transparency. Luc Falempin, CEO of Tokeny, said that to "bring tokenisation to scale, institutional distribution and credibility are key - and that's exactly what Apex Group brings to the table."

© Global Custody Pro. Published by Digital Content Operations LLC. All Rights Reserved. This newsletter was edited by Brennan McDonald.