During the Q4 2022 earnings call on Friday, BNY Mellon CEO Robin Vince discussed digital assets. He said that after launching its crypto custody service last October, it continues to be a focus for the bank, more on tokenization and distributed ledger (DLT) rather than crypto. Broad adoption is not envisaged in the next two years, possibly in five years. While it’s not certain that traction will happen, BNY Mellon has to have a presence just in case.
On that latter point, Vince said, “It would be like being the custodian of 50 years ago and sticking with paper and not adopting a computer. That’s not going to be us.”
The final version of the Basel banking rules for crypto-assets was published in late December. BNY Mellon and other banks were concerned about a requirement for crypto custodians to set aside a dollar of capital for every dollar of crypto in custody. The final rules said those capital requirements applied to banks owning the assets, not to custody of digital assets.
Cryptocurrencies have far more traction than the tokenization of conventional assets such as stocks, bonds and real estate. Hence to get up the learning curve and avoid being usurped by startups, banks need to be active in the space.
Robin Vince digital asset comments Q4 earnings call
This is what the BNY Mellon CEO had to say:
“We went live with our digital asset custody platform in the U.S. in October. And as I highlighted in my OpEd in the Financial Times a month ago, this will continue to be a focus for us, not so much for crypto but really the broader opportunity that exists across digital assets and distributed ledger technology. If anything, the recent events in the crypto market only further highlight the need for trusted regulated providers in the digital asset space.”
“Specifically for digital assets, it’s the longest term play out of any of the things that we’ve talked about. I expect it to be negligible from a revenue point of view over the course of the next couple of years. It might be negligible for the next five years. But as the world’s largest custodian, we are in the business of looking after stuff. We look after $44 trillion worth of stuff. And if there’s going to be new stuff to look after, we should be in the business of looking after it.”
“If the way in which we look after stuff changes, which is the point about the technology, we have to adapt to that. And so we’re investing for a future that probably will come to be. But may not. But if it does come to be, we have to be there. It would be like being the custodian of 50 years ago and sticking with paper and not adopting a computer. That’s not going to be us.”
“So we’re investing, we’re being cautious, we’re being deliberate and we’ve got R&D in different parts of the company and it’s measured. But we do think it’s important for us to participate in the broader digital asset space.”