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Crypto + Wealth
Wall Street Giants Spy Opportunities
Rising From FTX Ashes
BNY Mellon, BlackRock, Goldman press ahead with digital assets
But regulators warning of risks and contagion pose challenges

Cryptocurrencies are on the ropes, but banks aren’t giving

up on digital assets. Source: 731/Getty Images

By Anna Irrera, Suvashree Ghosh and Yueqi Yang

January 30, 2023, 5:23 PM UTC

Share this article Bank of New York Mellon Corp. traces its history back to
1784 and Alexander Hamilton. But even this venerable
institution is finding the lure of the crypto world too
New strong to resist.
Gift this article

Despite all that’s gone wrong in the industry, with

Follow the authors
trillions in losses, spectacular bankruptcies, the arrest of
@annairrera Sam Bankman-Fried — the world’s largest custodian bank
+ Get alerts for and other financial giants are hoping to expand in crypto
Anna Irrera
— not shrink.
@Suvajourno

+ Get alerts for Cryptocurrencies are a small part of the sprawling digital-
Suvashree Ghosh asset universe they’re targeting, betting the “crypto

@Yueqi_Yang
winter” will help them do what they couldn’t quite pull

+ Get alerts for

off during the now-forgotten crypto spring: make inroads
Yueqi Yang into key parts of the business once and for all.

In this article They’re pushing ahead with projects in blockchain, the

digital scaffolding that logs transactions. They’re
BK
BANK NY MELLON expanding offerings in tokenization — the issuance of
49.96 USD tokens representing real, mainstream assets like bonds.
-0.11 -0.21%
Another goal is crypto custody, where firms safeguard the
BLK
BLACKROCK INC
assets for clients, even though recent guidance from
751.39 USD regulators makes that more costly.
-7.79 -1.03%

Open From BNY Mellon — which launched a crypto custody

platform one month before Bankman-Fried’s FTX filed
for bankruptcy — to mutual-fund giant Fidelity
Investments, BlackRock Inc. and Nomura Holdings Inc.,
members of the Wall Street establishment are planning
for a future in digital-assets.

“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,”
Robin Vince, chief executive officer at BNY Mellon, said
this month on a call discussing earnings. “If anything, the
recent events in the crypto market only further highlight
the need for trusted regulated providers in the digital-
asset space.”

A spokesperson for the company said it believes in the

“transformative potential” of blockchain, with its ability
to improve accuracy of record-keeping, handling of
certain asset types such as real estate and loans, as well
as more efficient settlement.

But there are significant hurdles. Regulators, cool on

crypto even before FTX’s downfall, will almost certainly
become tougher on increased exposure at firms they
oversee. And with a downturn looming, banks under
pressure to control costs are making job cuts that may
scale back their ambitions. Plunging crypto prices and
valuations won’t help rekindle investor demand either,
although a rebound in token prices this month may signal
the worst of the recent chaos is over. After a brutal 2022,
Bitcoin is poised for its best January since 2013.

Stormy Ride
Crypto tokens have lost over $2 trillion in market cap since 2021
peak

Month-end Market Cap

Oct-21 $2.7T
Nov-21 3.1
Nov-21 2.7
Dec-21 2.3
Jan-22 1.8
Feb-22 1.9
Mar-22 2.3
Apr-22 1.9
May-22 1.3
Jun-22 0.9
Jul-22 1.1
Aug-22 1.0
Source: CoinGecko 2.0
Note: In early November 2021, market value hit its peak
1.1
of $3.1 trillion
0.8
0.8
Here’s what firms have planned:
1.1

BlackRock

At BlackRock, teams will continue to explore using digital

assets in capital-markets offerings, according to a person
familiar with the matter. The world’s largest asset
manager is focusing on four areas: stablecoins,
permissioned — or private — blockchain, tokenization and
crypto assets.

Last year, BlackRock struck a partnership with digital-

asset exchange Coinbase Global Inc. that would make it
easier for institutional investors to manage and trade
Bitcoin. A representative for BlackRock declined to
comment on its plans.

Read more: BlackRock Teams Up With Coinbase in

Crypto Market Expansion

Goldman Sachs

Goldman Sachs unveiled its digital assets platform in

November, with hopes that clients will use the technology
to issue financial securities in the form of digital assets in
classes such as real estate.

The firm, along with Banco Santander SA and Societe

Generale SA, helped the European Investment Bank issue
a digital bond last year using blockchain technology. The
settlement took a minute, compared to the several days it
would normally take, according to Mathew McDermott,
Goldman’s global head of digital assets.

“Using this technology allows us to transform the risk

profile of a trade,” he said. “It’s not a pipe dream, there is
real value.”

Goldman also has a team of seven traders who deal cash-

settled crypto derivatives for clients. The crypto desk,
which was relaunched during the 2021 virtual-currency
rally, allows clients such as investment funds and trading
firms to buy and sell cryptocurrency futures, non-
deliverable forwards and cash-settled options, as well as
the ability to go short or long on some exchange-traded
products via the prime business.

JPMorgan

JPMorgan Chase & Co. CEO Jamie Dimon has long

lambasted cryptocurrencies. He recently likened crypto
tokens to pet rocks and said Bitcoin was “hyped-up
fraud.”

But the bank has been active, spending several years

developing blockchain-based systems to run traditional
financial transactions. It’s running a number of projects
from its blockchain division Onyx, including a distributed
ledger-based payment network for banks, called Liink. It
also has JPM Coin, a token used for payments, and a
platform to tokenize traditional assets.

Fidelity Investments

Fidelity Investments plans to expand the types of assets it

offers custody for beyond Bitcoin and Ether, though such
plans aren’t imminent. The firm will explore offerings
around asset staking — a process that allows token
holders to lock up their coins and earn yields in return —
and lending, according to Fidelity Digital Assets’ Head of
Institutional Chris Tyrer. The company has continued its
crypto push, hiring an additional 100 people and
targeting 500 in the division by the end of the first
quarter.

Cboe

Cboe Global Markets Inc. is adding participants to its new

digital-assets spot-and-futures trading platform. In
November, the company announced that 13 companies
had invested in the platform, including trading firms Jane
Street, Susquehanna International Group and online
brokerage Robinhood Markets Inc.

Read more: Cboe Digital Seeking to Expand Crypto

Trading Beyond Five Tokens

“Recent events have brought into focus why investors

could benefit from a safe, trusted and transparent
marketplace,” and some of the investor-protection
practices that are standard in regulated markets, said
David Howson, president of Cboe Global Markets.

CME Group

After the Chicago-based global exchange group started

offering cryptocurrency derivatives more than five years
ago, it’s planning to work on new products related to
reference rates this year, said Tim McCourt, CME’s global
head of equity and FX products.

“We have seen more interest manifested in CME’s offering

given our position as a regulated entity,” he said. “It’s
becoming more important to more participants in the
market, given recent events.”

Even in the days leading up to FTX’s collapse, CME saw a

record day of trading in its crypto products, with 207,205
contracts traded on Nov. 8.

TP ICAP Group

TP ICAP Group Plc plans to launch a crypto spot-trading

platform this year, after the interdealer broker received
regulatory approval. The firm’s digital-asset business is
also working with other divisions in the firm to see how it
can integrate crypto, with a focus on the buy side.

“This is an opportunity for more traditional financial

firms to enter the crypto-asset market and provide
services to their clients that have the appropriate
governance, segregation of roles and controls,” said
Duncan Trenholme, co-head of digital assets at the
London-based firm. That’s “something their clients have
come to expect across traditional asset classes and will
now expect in crypto.”

Societe Generale

The French bank is pressing ahead with its work around

security tokens, the digitized versions of existing
regulated asset classes, said Didier Lallemand, a
managing director for the bank’s venture arm.

“We will see a traditional switch from bond and securities

issuance on tokenized securities,” Lallemand said. A
harder part of getting blockchain projects off the ground
is finding the correct legal and regulatory framework:
winning agreement from regulators that a tokenized
security issuance can take place, Lallemand said.

StanChart, Nomura

Standard Chartered Plc launched Zodia Markets in 2021, a

digital-asset broker and exchange targeting institutional
investors. Following the FTX collapse, Zodia doubled its
customer pipeline, according to CEO Usman Ahmad.

Zodia is pushing ahead with its growth plans and hasn’t

made any changes to its “already extremely stringent”
risk parameters since FTX, Ahmad said. “We’ve seen
continued momentum and client interest into 2023,” he
said.

For Nomura, which launched its crypto arm amid a deep

market rout in September, this is the right moment to
dive in, said Jez Mohideen, CEO of Nomura’s crypto unit,
Laser Digital.

“It’s the best time to build the business because you

understand the pain points in the market,” Mohideen
said.

Read more: Nomura Crypto Arm’s ‘Worse Case’ Is Profit

in Two Years Post-FTX

State Street

State Street Corp. is continuing initiatives to offer custody

of cryptocurrencies. CEO Ronald O’Hanley drew the
distinction between cryptocurrencies and other digital
Have a confidential assets such as central bank digital currencies, or CBDCs,
tip for our
reporters? during an interview at the Davos World Economic Forum
Get in touch
this month.

Before it's here, “There is still a bright future for tokenization,” he said.
it's on the
Bloomberg “There’s a lot of central banks thinking about central
Terminal
bank digital currencies — I think that is proceeding
Learn more forward at pace.”

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