Wall Street leaders, investors, technologists and other market influencers gathered in New York on Monday for a series of lively panel discussions and exchanges on the evolving crypto-asset industry. The exclusive seminar, "Institutional Crypto: Laying the Foundation," was hosted by Bloomberg, in collaboration with Galaxy Digital and Fidelity Investments.
Roman Regelman, Head of Digital for BNY Mellon, was joined in a late afternoon panel, “Laying the Foundation: Institutions Discuss What’s Next,” by Lou Maiuri, Head of Global Markets at State Street, and Elisha Wiesel, Chief Information Officer at Goldman Sachs. The panel discussion was moderated by Bloomberg Editor-at-Large, Erik Schatzker.
The panel covered a range of issues surrounding the crypto-asset class, and was asked if it was a currency, a commodity or a security, as regulators currently see it. According to Regelman, the answer is potentially all, and he said “In some ways there is a parallel with gold which was both a currency and a commodity. Gold has a fundamental “utility” value – crypto and the underlying technology does too. How much is that fundamental value worth? That answer is still evolving, but it is certainly greater than zero.” Adding, “It also parallels with options, which was adopted as an accepted investment vehicle, once its framework was properly defined and regulatory frameworks developed. What makes crypto unique is that its underlying technology – the blockchain – facilitates a straight-through process all the way from trading to settlement.”
Regelman offered the audience an analogy to help visualize how he sees the dynamic with new entrants in the crypto-asset space, and pointed to the airline industry and introduction of Sabre’s reservation system. Said Regelman, “Sabre helped American Airlines, it didn’t hurt it. It may have dipped into their margin share by nature of the booking fee market share they would take part of, but it provided a platform for thousands of new customers to access their product or access it in a different way – as well as other airlines in the ecosystem. All boats, or airlines in the Sabre analogy, benefitted from a rising tide.” Adding, “In our industry and in the crypto-space in particular, the fact that many new entrants, including some competitors, are becoming more reputable and advancing is good for everyone. We are like one of the airlines in that sense. All advances in the financial services industry enable emerging areas to evolve and thus for us to support more and we become smarter. There are some companies that may compete against us, but in different niche areas. They don’t have the same capabilities we do, or the same client base that we do. Some of our clients compete with us in certain areas, but we still have broad relationships with them.”
The panel also addressed the question of what’s holding the crypto-asset class back. Regelman cited the many risks associated with crypto and an unclear regulatory framework. Regelman called out several of the risks creating headwinds, including: potential AML/KYC lapses (source/misappropriation of funds), cybersecurity (hacking keys, identity, etc.), technological implementation, capital needed to support market-making and servicing, and general liabilities (legal or otherwise). Though these many headwinds persist, Regelman said that strong interest in this field exists from many smart people and institutions. “One of the most popular courses at MIT, Stanford, Carnegie Mellon University, and other top universities is their crypto class.”
As for BNY Mellon’s role and outlook, Regelman emphasized that the bank is engaged in dialogue internally and with our clients, as a trusted party, willing to support client demand for the asset class. “Though at this point, tangible external demand from institutional investors is limited,” he concluded.