Hollis Johnson/Business Insider
- As the ‘concept of money’ evolves, custodian banks like 234-year-old BNY Mellon are changing in tandem, Lucien Foster, the firm’s head of fintech partnerships, said in a recent Business Insider interview.
- The banks used to store gold, money, paper stock certificates, and other valuables in large vaults. Now, with the advent of cryptocurrency, Foster explains how they’re catching up to become custodians for a new valuable asset.
- Foster was recently listed as one of Business Insider’s 100 People Transforming Business.
- Visit Business Insider’s homepage for more stories.
The future of a major custody bank looks nothing like its past. Gone are gold bars and paper stock certificates, stored in soaring, high-security vaults. In are technology platforms that track forms of currency still in nascent stages.
No matter the asset it’s storing, the custody bank’s role remains the same, explained Lucien Foster, the head of fintech strategy and partnerships at BNY Mellon, in a recent interview. Foster was named as one of the 10 People Transforming Finance.
"You still need custodians, because custodians provide something technology will never provide, which is trust and this idea of surety," Foster said. "The idea of a custodian is evolving, but it’s also staying close to its foundational roots of ‘I trust that whatever I have of value will be kept safe in whatever form it takes.’"
Foster traced 234-year-old BNY Mellon’s history: "If you go back to 100 years ago, there would be kids running stock certificates across Wall Street back and forth, from one bank to another."
Then, just under 50 years ago, those physical stock certificates became digitized. Other financial instruments materialized: options, as well as derivatives, which "are wholly creations, foundationally, because of technology," Foster said.
BNY Mellon has evolved to track them all.
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Now, Foster is working with both startups and established financial institutions to tackle the next generation of custody-related conundrums. How, for example, can a university client process tuition payments from a student seeking to pay in cryptocurrency?
In the future, custodians may include a broader group than the traditional roundup of Wall Street institutions. Foster named cybersecurity companies as one example of a potential future custodian.
"I think that’s fascinating to think about. Why not? This is where we’re going," he said.
- Read more:
- Fidelity, a household name in American investing, is plotting a big move into cryptocurrency trading
- Goldman is rolling out crypto custody services
- A company trying to solve one of the biggest pain points in cryptocurrency just raised $8 million, and it could help lure big Wall Street funds to the burgeoning industry
- ‘A new era for capital markets’: The Swiss stock exchange is launching its own cryptocurrency exchange
- Coinbase has launched a crypto debit card in the UK
- An inside look at Digital Asset, the blockchain company that’s shifting strategies as Wall Street loses interest in the technology
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