‘Digital assets are here to stay’: BNY Mellon embraces crypto
Bank of New York Mellon has begun to develop the technology and business acumen needed to manage cryptocurrency, driven by strong demand for digital-asset services among clients.
The New York company, which has $425 billion of assets and more than $2 trillion of assets under management, announced last week that it’s building the ability to store and manage digital assets on behalf of customers.
This includes forming a team of technology and business professionals; developing technology that will allow customers to manage cryptocurrency alongside all their other assets; working through the security and risk challenges of handling digital currency; and figuring out which crypto assets will be most popular with clients going forward.
BNY Mellon is joining other established financial services firms, like State Street, Fidelity and Northern Trust, that are betting investors want a traditional institution to handle their digital assets, rather than a crypto-age company such as Coinbase. JPMorgan Chase, Goldman Sachs and Citigroup are all said to be working on this capability, too.
So will the companies racing to build out their crypto strategies have a first-mover advantage?
“I think the devil is in the details,” said Brad Bailey, research director for capital markets at Celent. “Fidelity, for instance, has had a type of offering for a while. If a bank can come up with a reasonable crypto custody strategy where they are comfortable with the risk, we are opening up a very new chapter in the short but interesting history of cryptocurrencies.”
Bank executives say the initiative is driven by customer demand that they believe is here to stay. Institutional clients, asset owners, corporate clients and wealth management clients have all been asking for this, said Michael Demissie, the head of advanced solutions at BNY Mellon. These clients seek to manage their cryptocurrency through a highly regulated financial institution versus a newer or lesser-known company.
“Our clients hold certain assets with us and now with the introduction of a new asset class, it would make sense for them to be able to have everything in one place, where they can get all services together: one view, one source of reporting and the ability to do all the things they do with other assets, like lending, collateral and other services in one place,” Demissie said.
“Trust is key, right? It’s what we do for a living,” said Caroline Butler, the head of custody at BNY Mellon. “One of the first principles of being a custodian is to make sure you’ve got the right control environment set up to keep clients’ assets safe. And 250 years of doing this as a company, we are matured in terms of our policies and practices and have gained that trust from clients, but…