This is an automated transcript of the Ondo Summit Panel with traditional finance (TradFi) executives, “Redefining Banking and Payments: Where Private Meets Public Blockchains.” The streamed video is available here.
Felix Salmon: Thank you. And apparently there’s a quarter of a million people watching the live stream, so no pressure. Welcome. And yeah, this is a panel all about the private blockchains that have been developed and exist and are moving trillions of dollars around the world, already and where it stands and the degree to which they’re gonna be opened up.
And I think the place I’d love to start with would be with you, Raj, because you have a prime example of this. You have your own blockchain, which you call MTN, and I’m gonna come out and say that probably most people here haven’t even heard of it, but it kind of, it plugs into all manner of things. Tell us a little bit about what you are up to.
Mastercard, Raj Dhamodharan: Thanks for having me. So, Mastercard started this journey a couple of years ago where we saw a couple of things happening. Obviously everybody knows about the public chains and the assets that are going in, the currencies that are going in. That is one aspect of it. There is also when it comes to trade, when it buying and selling, you need money.
And obviously stablecoin is one answer, but there is also $18 trillion worth of bank deposits as of last month, I think in various banks some of whom are represented here. End of the day, that is a scalable business model for the banks. It’s distributed, it’s available, and that needs to be available for transacting as well.
So what does it take to put that together? Well, how do you solve this where you need to represent this money, that fiat money that exists? In some cases there may be stable coins as well, but there is assets that are coming in the public chain. The first thing that we said that we needed to do is, is our first product, which is whenever you interact with the public chain, you need to know who the counterparty is.
You need to know what they represent. Many of the companies that are here represented here is actually issuing assets, and they’re actually regulated in their own sense, and they they, but you need to know that as a, as a person buying or selling. So knowing that and having a framework for identifying those counterparties is essential.
So we launched a product called Crypto Credential First, which is a building block towards the MTN that you refer to. So that is the first piece and the second, how do you represent the money itself in an interoperable way, the bank money, as well as some other forms of the money being stable coins or even other forms of value that is represented.
How do you represent in the blockchain, how you complete the transactions? Now, this is not just about the capital. The capital market assets is a big use case. That’s why this conference exists and that’s where many of the people, but there are other forms of assets that people want to tokenize as well.
We have trade finance who wants to do letter of credits and, and invoices and represent that in token form as well. So end of the day, this all need to be orchestrated. So what we are, multi token network is really a platform. Think of it as a platform on which applications can be developed, where you can understand who the counterparties are.
You can bring bank money, some of which would be represented in traditional ledgers, not even blockchain, some of which would be represented in a blockchain based technology, upgraded, but still living within the bank. And some forms of the currency in this beginning to come. You’re seeing some examples of this in markets where the bank money itself is going to the, the public chain, but how do you orchestrate all this?
End of the day, we need to deliver a net effect of a DVP delivery versus payment use case across multiple applications. Some are capital markets, some are not capital market, we won’t be the one issuing the asset. We will not be the one, even you know, representing the final custody of that asset.
But we want to provide a platform on which people can build and build applications. So we have a couple of banks who are connected and more applications connecting on those is a great example of that.
Felix Salmon : So, okay. So tell me a little bit, first of all, about, this sounds great in theory, in practice,
Who’s using it? How popular has this roof? How long has it existed even?
Mastercard, Raj Dhamodharan: Yeah, so we, the journey has just started, you know, the, the overall regulatory environment on how not every bank was ready to get into this. I think that is changing. It’s already changed outside us and in the current climate.
I think it’ll change here as well. So we publicly announced, you know, we first did in Hong Kong with Standard Chartered, a carbon credit based transaction. Late last year, we announced a partnership with JP Morgan. There are more conversations happening. It’s early days, but end of the day this is about platform building, building platforms, scalable platforms, takes time, and the right building blocks need to be in place.
We think the first building block is really having this kind of a, a, a mechanism where you can identify the counterparty, have a, a set of rules by which you can identify and interact with for whatever transactions are. That’s our crypto credential. and the second is really providing this platform on which applications can be built.
Felix Salmon : So yeah, I mean, as, as a journalist, I talk to a bunch of tech companies and all tech companies tell me they’re a platform. Everyone needs to be a platform these days. You know, spoiler alert, we’re gonna about to talk to Ryan about moving deposits around the world. And you are a bank and you have bank deposits.
It’s obvious why Citibank would be doing that. Can you just talk a little bit about. Why MasterCard makes sense to be the entity that is creating this, this layer and this platform?
Mastercard, Raj Dhamodharan: Yeah, it’s a very good question. So today we bring thousands and of thousands of banks together in our traditional business, which is card based business.
Today you can get a card issued from one of the banks and walk into 130 million plus locations anywhere in the world. And use that without having to pre coordinate how the money is gonna pay. You’re gonna go tap somewhere and let you walk out with goods without checking with you. Who issued the card and where it came from?
Everyone goes through that experience every day, but how is that possible? It is possible based on a set of rules that on which people can trust and operate. So this platform business is not new to us. We know how to organize ecosystems, bring parties together in an equitable way so that they contribute value and they get more out of it from the network because the network grows and that happens when people can trust it.
When people can conduct transactions in a trustworthy way, identify counterparties in an easy way and build solutions. So that’s what scales, and we’ve done that in card network. We’ve done that in open banking, we do this in ACH and so we think this, this requires such an organization as well, and that’s what we are hoping to add value.
Felix Salmon : So Ryan, over to you. You also have your own blockchain. Tell me a little bit about yeah. Moving money during Golden Week.
Citi, Ryan Rugg: So we built Citi Token services. The last couple years went live officially in September this year. And the pain point that we were trying to solve for was we service, you know, 19,000 clients that you know are 90 plus countries.
Typically on a day-to-day basis, these large corporates tar are managing liquidity and payments and multi different. So you keep buffers of cash in these different regions, which is really an inefficient use of cash. And the reason they do that is ’cause bank holidays and cutoff times. So the ability to move money instantaneously 24 7 on a 365 basis is really what our corporates wanted.
So if you needed it for, you know, m and a activity, overdraft, whatever the case is, you can use that. So that’s what we built. So, you know, Raj talks about like the network. So we built Citi token services within Citi’s, four walls, right? So you now we can meant to burn, you know, tokens within Citi, but we’ve obfuscated all.
All the complexity of a blockchain away from our clients, and that was by design. So, you know, if you’re sending money from New York to Singapore, we min it in New York, send it to Singapore, deposit it, but the, the clients have cash in their accounts. Like the feedback we got was like, one, this technology is new.
It’s still emerging. They don’t have the resources. Two, they don’t wanna manage tokens yet. Large enterprises is who we’re targeting.
Felix Salmon : So in, I mean, that seems very similar in in the, in what, to what you were saying about your own thing, where you, it’s just about taking cash, using it to buy a thing or just using it to move the cash from one place to another.
And as the client, I don’t want to know from blockchain, I just like, you are like, you are pulling away from the, the trendy buzzwords. You’re just like, let me make certain things that you wanna do a bit easier. So in terms of where you’re at, you’re in, how, how many different countries are connected to this network right now?
Citi, Ryan Rugg: So currently right now we’re three, but, you know, adding additional this year also.
Felix Salmon : And is there any vision of ? Making this be bigger than just the four walls of Citi.
Citi, Ryan Rugg: We actually started, like our thesis statement our clients gave us was multi-bank. Multi border, always on liquid and payments. So we started working with various organizations like the Regulated Liability Network, RSN, project Agora, on what does that network look like for the future?
But if you can’t move a token within the four walls of your own institution, how are you gonna connect to a network? So really building out that with our clients, and I truly believe success breeds success. So showing value day one where clients, where they have money, where they were unable to do ’cause of a bank holiday or Chinese New Year last week, now they can move it instantaneously.
Felix Salmon : So what’s your success criterion? Like, what, what does, if, if I come back here in a year, you know, what, what would you hope to be able to show?
Citi, Ryan Rugg: It’s really based on client demand. I mean, obviously growing more and more client demand because you know, the speed of money doesn’t match the speed of the internet, right?
If we think about digital commerce the way that money actually moves in reality, and I think it’s been interesting launching the early adopter program at Citi is, you know, we thought it was just for liquidity and payments, but the uses of different programmable money. Like if my account drops below X in Singapore, send money directly to New York.
So there’s or m and a
Felix Salmon : has someone done that yet?
Citi, Ryan Rugg: T plus one settlement. So you’re seeing these like use cases that, you know, we started very small, but it’s starting to, you know, expand. And I think the holy grail that we’re all trying to get to is like DVP atomic settlement, right? Where, but if you don’t have like the cash on ledger to be able to move money real time, you’ll never kind of get to that RWA instantaneous settlement.
Felix Salmon : So, that brings me to you, Caroline, because you have, like a basically this, and then broadened out across a whole bunch of other asset classes too. Tell me about, do you, I mean, everyone on this panel has a blockchain. You have a blockchain. You, you tell you you must have a blockchain.
BNY, Caroline Butler: We do. Plus we have a platform. Yes, of course we have. But, but I do think, oh, joking aside, you know, the platform piece is very important, right? Because that breeds that network effect. We have a philosophy in BNY that this is about a fundamental change in market structure, and obviously blockchain technologies have proved themselves as great utilities for assets like bitcoin.
We started on the crypto custody side. We are the world’s largest custodian. We custody 51 trillion of assets. Clearly that is there’s a way to go in the tokenized world and the digital asset world to get to that level, but we felt the obligation to be there to service our clients on the crypto side.
So we started. And October, 2022 with the crypto offering for Bitcoin and Ether. Obviously the market shifted a little bit at that moment in time, but we stayed convicted. And why did we stay convicted? Because we felt that, first off, you needed that trusted partner to actually really enable this ecosystem to thrive and to enable the market.
We fundamentally believe that blockchain technologies, smart contract technology is a derivative of, are the technologies of the future to break some of the issues that exist in the market structure. And don’t hear me say that we’re gonna incrementally optimize a 50-year-old market infrastructure. No.
We believe that we’re at the precipice. That’s your job, . We believe that we’re at the precipice of real market structure change. So whether you wanna relate it back to the introduction of CCPs, CSDs back in the seventies ish, or whether you wanna think about it as electronic trading, like this is the next big shift.
So people shouldn’t think about it as just . Incremental benefits of a technology like this is the next wave, and why is that important and what does our digital asset platform do? We are enabling whether it’s, we started with custody because if you can’t keep the assets safe. I mean, you’re starting from a very rocky foundation, so we felt like putting that foundation in place, and you can think about that as a little bit of the backend infrastructures as well.
The same way you don’t want clients having to think about the infrastructure pipes and plumbing. Same way. You want them to be sure that their assets are safe. But it’s enabling then the mobility of those assets and the greater utility of those assets through the value chain. So at BNY, we operate across the entire value chain, whether it’s issuance, payments custody financing, collateral with the largest collateral provider.
For us, it’s very important that if a client has an asset. The ability to now wrap that asset, whether you call that tokenization or other, to actually get greater value out of that asset instantaneously. So the next step is atomic settlement. So free up the asset straight away, but freeing it up for what purpose, right?
It’s to then create extra value to pump it through either into collateral, to lendnit to do many, many, many things that today in the ecosystem we live in. Either take multiple days or actually not possible to do. So set very simply for us, it’s like let’s make clients money, work more for them and work more for the world and do that in a very seamless way, 24 by seven.
So the actual platform itself enables that. Where we are at the moment in the ecosystem, there’s still, particularly on the tokenization side, there’s still a lot of, you know, use cases that are starting to come to market that are really proving out. There is . Like day-to-day value. So whether it’s tokenized money market funds, we’ve got the very big luxury to have a lot of diverse clients who are really evangelizing this space.
So we are actually managing and servicing, I think it’s the majority of tokenized funds at BNY across public and private blockchains, which I think is somewhat unique for banks. And again, that was a privilege that we got because we educated ourselves on public chains through crypto. So I think we understand where public chains have an advantage for certain use cases versus private chains, and also on tokenized bonds as well.
We’re seeing a lot of work there, whether it’s through the ECB trials and different initiatives. So again, that to me is more of an efficiency play. Take a lot of the inefficiencies out of the market, make it run cheaper, but also take out the operational risk.
Felix Salmon : So it seems to me a little bit as though you are doing this incrementally, you’re like, I’m gonna, I’m going to, you know, tokenize a money market fund over here.
I’m gonna talk to the ECB over there. I might dry a bond over here. I’ll build out a platform here. There will be demand from various different clients and we will grow. And yet you are saying like, no, this is not the plan. I do not want to be like. Growing one step at a at a time. I want a revolutionary change.
And I’m just kind of wondering when that revolutionary change is meant to happen,
BNY, Caroline Butler: I do you think it will take a while? Right? I, I, Rome wasn’t built in a day, I think for a real shift in the market. It’s going to take a number of years, but it’s those use cases that are incremental. The foundations are there now.
We’ve got our platform. It can do many, many things. These use cases are today value use cases. They’re making either investors money or they’re making the intermediates, the asset managers money. So you’re seeing real money then come into the ecosystem as a result of that. So those needs of clients are being instantaneously met.
And then to Raj’s point, then you get the network effect that starts. To build off that. And that’s why we all work with each other to make sure that we power that. So I think you’ll start seeing that shift when you start seeing more and more flow, particularly coming into the tokenization sides. And then you’ll start to see the momentum in the market where that market structure will really play into it.
For me, the last mile is cash, though there’s still a bifurcation of solutions in the market. Some of them have a real market fit, stable coins. But there’s still a need for something that is truly interoperable across all of the players that can enable that on cash ramp, and I think that’s one of the last mile hurdles.
You’ve obviously got the liquidity hurdles that also exist in the tokenization market. We can solve for that on the collateral side and we can solve for that and BNY by hooking up to liquidity venues that I don’t see as an issue. That’s about bringing the ecosystem together, but I think the creativity that needs to happen in the market now.
is how do we bring on chain cash in a real way that can operate across the ecosystem and bridge the divide between the security side and the cash side. Yep.
Felix Salmon : What’s that? Raj, Isn’t that Like what you’re trying to do?
Mastercard, Raj Dhamodharan: No. So no, the problem statement is real. So there are two aspects of this inter interoperability that Carolyn just talked about.
One is there are multiple banks participating. There is a sending bank, receiving bank. How does that cash represented on chain kind of can clear and get settled. It happens in a certain way in the traditional network. How do we make that chain on the chain without significant overhead in a standard way?
So that is problem one. And second is, how do you do the asset exchange? So they’re doing the building blocks. We are not doing the custody. So there are different parts of the ecosystems are coming together end of the day. We think there needs to be a platform that allows what I call just really simply apps to be built. Apps. There’s nothing but that is bringing end user value to a business end user, value to a consumer. They need a common fabric on which they need to operate, and that’s what the ecosystem is trying to build. We have an answer and there are there are other solutions out there as well.
Felix Salmon : Ryan, are you, are you in the market for a. Interoperable cash transfer platform that like, please someone give me one and I’ll plug into it.
Citi, Ryan Rugg: There’s several out there. But absolutely. We’re not trying to create a siloed Citi to you.
Felix Salmon : See there’s one person who doesn’t wanna be a platform that’s great
Citi, Ryan Rugg: That we don’t, the clients don’t want a citi token. They don’t want X bank token. They want multi-bank, you know, always on. So it doesn’t make sense for, you know, and that’s why we collaborate together on these bigger issues and like . Several of us up here on different working groups together, trying to figure out like how to drive this forward.
And you know, it’s not clear which one’s gonna win, right? I mean, there’s public private permission, like all different flavor flavors of it out there. But you know, from a global standpoint, standard standpoint, there’s definitely a ton of initiatives out there around the space. I would say, you know, I used to joke with my team, if I had a dollar for every time someone called me about a different network, I could retire, you know?
Felix Salmon : Okay. Nadine, bring, bring us back down what she said. , bring, bring us back down to Earth here. Where, where do you, like, having listened to all of this, having understood where, where these technologies are, where can you place that in the context of this just massive existing system that we, that you are part of at the DTCC andto what degree do you see the kind of agreement and consolidation that’s necessary for this to really take off?
DTCC, Nadine Chakar : I don’t know if it’s consolidation as much as it is harmonization and integration. Mm-hmm . But just to give you a sense, ’cause I think you asked Carolyn, what do you mean? Why is this taking so long?
The numbers or not … impressive. If you just look at DTCC and we’re the depository for the US equity market, so you’re looking at $98 trillion of equities, four quadrillion dollars in settlement. One of us messes this up, that’s not a good thing, right? So we’ve gotta be very careful and purposeful in our approach.
By all means, this is as disruptive of technology that we’ve ever seen in our collective lifetime, but it needs to be deployed with with purpose. Each one of these individuals and organizations as well as many people in in the audience, everybody’s doing a lot of great work, a lot of pioneering work in, in, in this space.
We view our job because we’re the depository and there’s a lot of philosophies, whether essentially CSDs will survive in a defi world, and who knows in 50, 60 years what will happen, but. In the immediate future unfortunately we’re not gonna tokenize everything in one fell swoop, right? So for a period of time, we’re gonna have traditional assets and tokenize assets, digital assets coexisting, and you need a party to manage that convergence.
And this is where DTCC comes in. The second thing that you heard, and you’ve made that comment a few times, they each have a platform. They each have a blockchain today alone. We heard our hosts here launched on L one. We heard Uniswap launch on L two. I mean, they’re coming up . Fast and furious every day.
Earlier Caroline and I were joking about like, we need to hire somebody just to keep track of these new innovations coming out every day. So, and Inadvertently, we’ve created a lot of silos. One of the biggest advantage the US market has is we’ve got one post trade infrastructure, but with the way we’re growing this thing up because of different reasons, right?
There’s speed of innovation, there’s been some of the regulatory constraints that were talked about in the earlier panel. So what we’re trying to do at DTCC is not replicate at all what they’re doing. What we’re trying to do is build a solid foundation that reinvents or reimagine what traditional things we’ve done today.
Right? As a depository, you do issuance, you do custody, you do clearing, you do settlement. We do collateral, but we don’t compete with anybody. What we do is we create the platforms or the foundation where then they run their apps on it, or they integrate their systems in it. And that is one part of the, of the journey.
I think Ryan also hinted at the other. We have two other big impediments that we’ve just gotta figure out. One is around standards which is huge. And you’re right, like same thing every day there’s an organization coming up, going, we’ve gotten five people around. Let’s have coffee and talk about standards.
And then the most important component is data. Until we can streamline how we talk to each other with, with standards around data, that is also gonna be very difficult to get the, the, the platform to call list. I don’t believe there’ll be one platform to rule them all. I think you asked a question, who’s gonna survive?
I think there’ll be many, many L ones, many, many L twos. There’ll be many, many platforms. I’m sure Raj’s competitors doing exactly what he’s doing. But there’s a role for everybody to play in this ecosystem. What we’re trying to do is just, is just be the like the way I think about them. Like they all have Lego blocks that they’re putting together and we’ve just got that flat sheet where we’re just building the apps and the castle on top of it.
So that is the role we’re trying to play. We’re very lucky. We’re in a trusted position with . All our clients, all of them are our owners. So we’re participant-owned and governed. So we’ve got an amazing ability to sit down and collaborate with the industry which is awesome.
We’ve got that same trusted position with our regulators. So we can build, bring the industry together and work together to make sure that we’re not overlapping, but complimenting as we push together. And this is the royal we. This is not just CTCC, but the royal we on trying to do that. I agree with Caroline.
It’s gonna take a while. Rome wasn’t truly built in a day but I’m hoping with the speed of technology and the new things, but we’ve gotta be careful. We can’t break, can’t leave like a lot of debris in our, in our, in our way. We’ve gotta be very thoughtful and responsible and pro and purposeful as we push forward.
But it will happen. It is happening.
Felix Salmon : When you say the industry, I mean, it, it, it’s the financial
DTCC, Nadine Chakar : services industry. Well, I mean, certainly here you go.
Felix Salmon : So you, so you deal mostly with equity securities? No,
DTCC, Nadine Chakar : no. We’ve got, we’ve got a little bit of everything. A little bit of everything, but,
Felix Salmon : but certainly mostly securities.
DTCC, Nadine Chakar : Obviously there’s a whole, you know, other universe of you know, options, futures and on, and so on and so forth. Then there’s a whole other universe of 200 other countries in the world, which all have their own different markets. Then there’s a whole other universe of crypto. And again, like huge, the almost countless number of regulators in, I mean, not just in the lots in the US but countless internationally.
At some point, where do you sort of draw the boundaries of, I mean, you can’t convene everyone in one place. Where do you kind of say, we are, we are, I’m just gonna sort of concentrate on the Fed and what they regulate or something like that. Where, where do you kind of say like, we are gonna have this garden where people can trust each other and if a bunch of kids wanna start trading meme coins, that’s fine, but that’s not gonna be on our platform.
I think you just said it right. We’re not gonna trade meme coins on our
DTCC, Nadine Chakar : Platform where we’re gonna, we’re gonna stick to the traditional markets. Obviously crypto is also an option. That was not available to us and it’s still not available, but it’s something that is in the realm of the possibility right now. Where do we start? We starting now in backyard. So we focus on the US markets, we focus on the US regulators.
Now, the beauty of this technology does, once you let a token go it may be issued here, but it could, it could move globally you know, at the speed of the network. So that’s why I think that will force regulators, they, we’ve done it before, right? Like we’ve, after the global financial crisis, the regulators did come together.
They did come up with standards. And my expectation is at some point we, we will do the same with, with . Digital technology, but for right now, we start where we know we can make a massive impact. The US markets are still the largest markets in the world, so if we can, as I say, if you can make it in New York, you can make it anywhere.
Right? And we start here and then we move forward. But we all represent global companies. We’ve got a global footprint and my guess is we’ll be able to influence and move forward just by the sheer impact of the actions that we will take. So it is a, it’s a global process, but we can’t sort of solve it globally.
We’ve gotta start where it matters. And for me, it’s here.
Felix Salmon: Ryan, you you’ve built this. Just tell me you have, this sounds relatively simple. I have a, I’m a corporate corporation. I have a bank account at Citibank, and I want to be able to move money. From Singapore to New York, how many different regulators needed to sign off on that before you could like start selling this to clients?
Citi, Ryan Rugg: I mean, Nadine had a really good point. Like we are a US domicile country, so we worked here first with US regulators to get all the approvals and sign-offs. But every country we roll it out in, we engage those regulators as well. So like Singapore was our first branch and we targeted the branches with the largest like
Money hubs as well as like time conflicts. So, you know, 5:00 PM in, you know, New York is 5:00 AM in Singapore, so typically you couldn’t set money. Now you can, but we worked, you know, with the MAS after getting all the US approvals to be able to do that and like,
Felix Salmon: so now how long did it take to get the US approval?
Rules,
Citi, Ryan Rugg: you know, it was a prolonged period, . It was, I mean, it’s a journey though. We’re all in this together and like, I’m sure that you spent a lot of time with like, you know, internally, externally, stakeholders to explain this technology and break it down in very like, you know, digital money like token, you know, bank account like wallet.
Making it very simplistic for everyone to understand and like kind of demystify it. And then also for that reason, we obfuscated . All the complexity of the technology from our clients. Like you log on to Citi Direct or via API, you don’t have to have a wallet, you don’t have to host a node like all that.
And like I think that gave comfort to our regulators also about understanding how we’ve set this up in a really focused on safety and soundness.
Felix Salmon: Raj, how many regulators do you deal with a week?
Mastercard, Raj Dhamodharan: So our traditional business we operate in, in, in hundreds, 150 plus countries. And so I don’t think I can give a simple answer.
So in, in, in this respect, it is we are staking a very phased approach. We are starting international US dollar international based transfers and the way that we have done is this goes back into one of the things that you’re probing with all of us. Is, is, is because of the lack of clarity in how banks can get involved and put money publicly on the chain.
So a lot of them starting, rightfully so for their clients and privately, but we want to get to a state where this can actually be public. That’s the first thing that, that, that, that, that need to happen. So the way we’ve solved for it, very similar to what Ryan said, none of the users of our system need to know anything about the chain.
They all interact using simple APIs. The capabilities are abstracted. It’s internal. So it’s easy for people to use. So we don’t have to go through that kind of a process. But if you want to really unlock this, the first thing is how how banks can directly engage and how the regulators see it.
Um, there are encouraging signs in this market, for example, on that now, and I’d really love to see a more clear regulatory clarity on that. There are other load boxes as well, right? There is we talked about once you put once you are ready to regulatory, put money on the chain you need to know how do you identify counterparties?
And we talked about that. That is a condition that is necessary for success. And end of the day it need to be interoperable. And Carolyn made that point as well, so that that is another precondition for this to scale. I think we see all of us putting building blocks in place, but when this come together, I think we can, we can really take it to the next level.
I think we are on the cusp of that. It’ll take years to Carolyn’s point, but
mm-hmm . Yeah.
DTCC, Nadine Chakar : There’s, there’s no silver bullet. It’s gonna take all of us in this room and everybody else to continue to collaborate. To build, to build this new digital ecosystem. So Wall Street 2.0 isn’t just gonna materialize.
It’s, it’s gonna take a lot of time. Yeah.
Felix Salmon: How much quicker do you think it can happen now with this new regulatory regime in the United States compared to four months ago?
BNY, Caroline Butler: It’s definitely gonna accelerate. We’re already feeling the momentum. A number of us are talking about, you know, . The oppression we felt last year versus this year, there’s definitely more freedom to really have the conversations.
I also wouldn’t underestimate the amount of education Ryan mentioned it. I think our obligation, we operating across like a hundred plus markets across a diversity of regulators. Is to do our job, to educate, right? So that takes time. I do feel there is a decent amount of that education now that’s paying forward.
I think the next step though, is to really think about this from a different lens. So if we’re just regulating the thing that has a technology wrapper on it that’s still traditional with just a technology wrapper on it, what we need to be thinking about is when we move to this wallet infrastructure.
How does that break the regulatory environment that we exist in today? And it will and it should. If it doesn’t, it means all we’ve done is just kind of optimized on we what we had, and we just kind of incrementally made it 20% better. It goes a bit faster. You know, it’s not as exciting as what it should be.
If we get it right, it shouldn’t fit the model that we have today because a wallet should hold many, many, many things. That will break the model we have today where we have agencies that are split a little bit more by asset class. We should have kind of a use case driven regulatory regime that sits and manages and is focused on that wallet.
And I think that’s the big shift, right? The education that was done historically was very. I would say important and narrow focused on what does the tech do? What are the risks? How do we make sure that we bring the institutional grade controls that we have? To Nadine’s point, we cannot afford to get this wrong on certain parts.
For example, on the custody and the clearing side, that is table stakes. You need to make sure those fundamentals are in place. But now I think the next shift is like, how do you really look at this in a different way? And how do we influence then the right amount of creative regulatory policies that can actually look at what should be a bigger disruption and a different way of managing capital markets.
DTCC, Nadine Chakar : Yeah, I think there’s a cultural shift here that we also keep need. I mean, we all grew up in environments where you had the equity team and you had the fixed income team and you had the derivatives team, right? And that doesn’t work in an environment where you’ve got wallets and you’ve got tokens that transcend them.
And you’ve also got middle and back offices that probably have not evolved or changed in in eons, right? So there’s also a cultural factor here. But we also, while we’re all giddy and we could feel the momentum, let’s remember that regulations have not changed yet. Yes. Right. So we still have, we still have a way to go, but I think hopefully
Felix Salmon: these things are path dependent, right? I mean, like there’s such a massive regulatory infrastructure both in the United States and globally, that the idea that that’s going to tear itself down and reconfigure itself around the whole, it doesn’t have to wallet, doesn’t.
DTCC, Nadine Chakar : It doesn’t have to, it needs to evolve to start to recognize. Exactly. Right.
So while we’re working with disruptive technology, I think the innovation is unfortunately gonna be incremental for a period of time before it catches up and takes off.
BNY, Caroline Butler: And it’s happened before. Yep. Right. Let’s not forget that, right? In like, again, go back to the seventies like it happened, right?
The regulators were able to come together. We created central deposit depositories, and there was a whole infrastructure built around that. But on the rec side, and then obviously the market infrastructure, so it can and should happen. The speed at which it will happen obviously is what none of us can predict.
Um, but again, if we’re not showing up, doing our part, it definitely won’t happen. .
Felix Salmon: Okay. I think that’s actually a really great place to end it. Thank you all. Nadine, Caroline, Raj, Ryan, you’ve been fantastic. Thank you. Thanks for listening.
