The Evolution of Custody from Physical to Digital with Roman Regelman, Head of Digital at BNY Mellon

Ashley, I'm really excited to be here. It's a great opportunity for me, for us to bring our story to your viewers. It's a great platform. So let me start with the story of how I got here. I was an early fintech entrepreneur, that was before the name fintech. We called it e-commerce at the time. And then I ended up in consulting completely by chance. Maybe that's a story for another interview. In consulting, I focused on two things: I always worked on digital, and I spent the majority of my time on the securities servicing industry. So when I had an opportunity to join Bank of New York Mellon, it's the first head of digital in our 237-year-old history. I already thought that's the best job in the world. I run our largest business, which is securities servicing, and I also lead digital across the enterprise. So often people ask me which hat are you wearing, and I say there is only one hat, it's two titles but one hat. Fundamentally, digital is our business and the business is becoming increasingly digital. The line between digital and what's not has absolutely blurred. I'm thrilled to be leading the business that is becoming digital in every interaction.

Yeah, so global custody business. We're responsible today for custody of $45 trillion of assets. I just want to make sure that everyone is hearing this. This is like more than double U.S. GDP. It's a massive, massive number. Domestic number which is basically roughly 20% of all assets in the world. So 20% of all assets in the world. Think about every stock when they trade, a stock exchange. Think about every bond. Custody really means safekeeping the asset, making sure that what you have is sound, is secure, it's kept, it's protected. In early days, custody was very physical. You give me a piece of paper, it's a valuable piece of paper, and put that in a vault. Or you have a piece of gold, you don't want to keep a piece of gold in your living room. Most people don't. You give it to somebody to keep that. Or I need to transport something from point A to point B, from Europe to the U.S., and I give it to somebody and you say please take good care of that, keep it in your custody. Of course, custody in a digital form. When you go and buy shares of a stock, you buy it through your broker, but you really want to make sure you have what you have. So custody is a record that you, Ashley, have 100 units of that stock, and you can rely on somebody to know that you absolutely have that. Nothing will happen to it. It doesn't matter what will happen with your broker, it doesn't matter what will happen with any other industry participant. You have it. That's what custody is about.

So, first of all, custody is already increasingly digital. When you buy that 100 shares, you don't get a certificate. You get an email, right? It shows up somewhere only on your statement, and the statement being an electronic statement. So in many ways, the digital assets, needless to say, in a digital customer, the customer is becoming more digital and assets are becoming more digital. So if you picture this continuum, we went from physical custody of very physical assets to more of a digital custody of physical assets, and now we're talking about digital custody of digital assets. So what do we mean by digital assets? It's a whole spectrum of things. The cryptocurrencies are certainly digital assets, and we know within cryptocurrency, obviously we all talk about Bitcoin, but there are many of them. There are central bank issued digital currency. So in essence, we have a dollar and we have a digital dollar, we have a euro and we have a digital euro. Some countries are already making pretty significant steps. And the last category, which is actually very meaningful, is what we call tokenized assets. The token is the asset. It could be a security, it could be real estate, it could be a piece of art. So as an example, there is a big building, and this building is in essence fractionalized. Of course, many of these things are available in the current world, but using blockchain technology makes these things simpler, in many cases more accessible, and frankly has a promise of decreasing transaction costs.

I mean, in many ways, it's a very significant position. In other ways, it's really part of our DNA. 237 years old, of course we fundamentally stand for trust. People trust us all over the world. When I talk about what is custody, custody is about trust. Custody is about safekeeping. But as we just discussed, the industry evolves. It evolves all the time. So the word innovation has been really present in our DNA, in our culture from the beginning. Alexander Hamilton, who founded Bank of New York, I mean, it wasn't absolutely innovative. And Bank of New York was the first issuer of what's called a fugio coin, which was a metal coin, and it was the first U.S. instrument. So obviously we went away the wrong way, but the reason I'm saying this is because it's trust and innovation, innovation and trust, that will always be part of our DNA. So today, as the assets evolve, as digital assets become much more of a part of the mainstream, we feel we have an opportunity but we also have an imperative to provide custody to all the assets, much like we provide custody to baby certificates. And for all the stakeholders, for us to play a similar role in digital asset custody. So it's evolution for sure, but it's just normal. Because as the asset becomes part of mainstream, we need to be there.