BNY Mellon is all in on digital assets, but that doesn't necessarily mean crypto.
The bank is forging ahead on initiatives involving distributed ledger technology, tokenization and digital cash, according to Roman Regelman, CEO of securities services and digital. The company began prioritizing digital assets about two years ago, as client demand rose, he said.
Even as the company has been working on digital asset products, crypto isn't its top priority. The 240-year-old bank
Regelman said the bank sees innovation as a risk management strategy, not a discretionary cost. In 2019, he had touted ways BNY Mellon
In an interview, Regelman outlined the bank's blueprint for digital asset development, the continuation of its digitization strategy and how risk management fits into its plan. The following transcript has been edited for brevity and clarity.
Can you outline your vision for digital assets, and what that looks like going forward?
ROMAN REGELMAN: We look at that in three ways. Number one, everything that we do, we want to do for digital assets. We do custody, clearing, we want to offer that for these new asset classes. Number two, it's technology. It's blockchain, and many other things that can help us advance and modernize existing infrastructure. It's taking our global and resilient platform, but making that faster, cheaper, better, more real time. Number three are the new use cases.
Tokenization could be the next wave of securitization, but done in a way that is much more accessible, easier and more digital. So the example that I like to use is, let's say I have $300 million, and I want to invest in Australian real estate. I can go to an investment bank and structure a basket of securities. But if I don't have $300 million, and I have $300,000, I don't have this opportunity at all. Tokenization of assets will allow these investments to be much more accessible, much more precise and, frankly, more secure.
We believe in the power of this technology. We believe that innovation can offer new use cases and quicker and cheaper access to capital markets. But we don't think that's about crypto. Crypto is an example of digital assets, but to say that digital assets are a lot more than crypto is an understatement. It's a lot more. Our horizon is long-term in our belief that between our custody business, our clearing business, our repos, markets, the payments business, that's where we need to be. Across all of it.
You mentioned that this is a long-term horizon. Where are you in that timeline? What's next?
We're talking about a whole wave of products and technologies that revolve around that. I was a consultant and used to do internet strategy for clients. Now, what is internet strategy anyways? It's a business strategy.
When we talk about asset classes, we will talk the same way about equities, fixed income and digital assets in the same sentence. That's how people are going to use blockchain. That's how we're going to tokenize things. It's going to be a normal thing.
BNY Mellon and Nasdaq are developing in-house digital-asset custody platforms for institutional investors, making them among the first in traditional finance.
That's the long-term view that we're talking about. And I cannot tell you if it's five years or 10 or 15 or 20, because it's five and 10 and 15 and 20 all at once.
Next, we want to do business by business and start bringing them into this arena. Digital cash is a big use case. Offering tokenization services to our corporate trust clients is a use case.
In the next year to year and a half, we're going to do a number of things to take the businesses that we have and extend them to digital assets.
Where do risk management and digitization collide? Are you adjusting plans based on the recent industry turbulence?
I would say that digitization is the biggest form of risk management. For certain new things, you need to adjust your risk management frameworks. But the business is 240 years old. Embedding risk management is what we do from the get go. We're not experimenting with digital assets, we're not experimenting with real-time payments, we're not experimenting with data-as-a-service. These are our businesses. Digital for us is not a think tank, it's not a parallel digital bank.
The goal is to digitize every product that we process, every client interaction, make that more of a digital-first. So that requires risk management constantly embedded.
We're using AI in our risk management organization. And on the flip side, we have a chief risk officer embedded into things like digital assets and data as a business.
