When Money Goes On-Chain: The Bank's Role in the New Financial Infrastructure

0:18Paul Bances: Welcome to another episode of FinTech Corner. I'm Brett Turner, founder and CEO of Travada. We're excited to continue this series on stable coins. We've got another great episode for you. We've got a fantastic guest. Before we kind of go there, again, this whole series is really talking about what is it going to take for stable coins to go mainstream in corporate finance and corporate treasury? If you think of a little bit of this journey that we've been on, it started a year ago, and it was really about all the need for all these use cases for stable coins and how they're going to start to really take off, knowing that a lot of it today is just into trading.

0:54Paul Bances: So we've kicked off this journey here to not only talk a little bit about what we've discovered and what we've learned and what we're doing and how that's being applied here at Travada, but we're all learning together. And we wanted to bring a lot of these voices together because so much is going on, so much is changing. And so maybe I'll unpack that a little bit, but I definitely wanted to introduce, we have Nadir Sari, who's the global head of corporate and digital banking at BNY. Excited to kind of dig in with you. We also have our very own Paul Bancis, who is a crypto expert in his own right.

1:27Paul Bances: He's part of Tramada's leading our efforts on the stablecoin digital asset side. When we say stablecoin, we also mean tokenized deposits and deposit tokens. We work with a lot of banks, and so we can use stablecoins. We can work with tokenized deposits that are going to be all happening as well. So it's an exciting time. All of this is starting to converge. And so I'll let Nandar introduce himself. Paul, again, expert in his own right. I have to say this because he's too modest. He might not say this himself. He co-founded PYUSD, one of the leading stable coins within PayPal, a part of a regulatory push, and also had part of Paxos and really part of putting this together and what we've put together in with Truvada of how now all of this is moving into corporate finance and corporate treasury.

2:16Paul Bances: And so before I turn it over to Paul, I'm just going to unpack a little bit of what's going on, too, from the landscape perspective, because things are moving really fast. So if you think we're in this massive glacial shift where we estimate about$10 trillion in corporate operating deposits, that's not investment, excess cash, that's operating deposits, that's globally at all banks on the corporate side, commercial banking. that is that 10 trillion is going to be shifting toward tokenized deposits. Some may be stable coins. So all of that whole shift at the end of the day, banks are moving toward tokenized deposits, deposit tokens, if it's consortium.

2:58Paul Bances: But where are those going to live? How are they going to be consumed? They've got to be consumable or in a way that corporate finance and corporate treasury can use them. So in a corporate or governed access layer, security, internal controls, your treasury policy, all these things matter if they're going to be utilized within all of the workflows and therefore be innovative and leverage there. Innovation is going to happen through utility. It's not about yield on the corporate side. We've talked a little bit about that. It's more around liquidity and the use of these tokens, especially as they pair with agents, is a very powerful combination.

3:37Paul Bances: And it's going to lead to a lot of automation. And so everything is kind of shifting digital. Everything is shifting toward data and everything is shifting toward automation with AI, the compelling event, tokenization, digital assets, stable coins, tokenized deposits, the other compelling event. So these two drivers, they're converging, they're teaming up, and it's really accelerating and getting really exciting. So I hope you're learning a lot from this because we're learning. I think part of this is that it's not just about, hey, we're sharing with you with what we've learned here at Travada, but we're still learning.

4:13Paul Bances: Yeah, we've learned a lot. We want to share with that our thoughts on that. But still, there's the crypto industry. They still don't quite understand a lot about the corporate finance and corporate treasury side or even the banking and regulatory side. and a lot of it is largely consumer or retail banking. And then you have the banking side who doesn't really understand as much on the crypto side and still even trying to solve pain points for their corporate treasury customers. And so you get these three camps and as these camps start to converge, we also wanna bring these voices out, voices from the banking side, voices from the crypto side and then really talk about how this is all gonna be applied and hopefully you're learning along the way.

4:54Paul Bances: we are. We're learning in these conversations that we're doing real time as well. We're asking real questions, not because we just want to ask questions, but because we want to know the answers of them as well. And we want to hear these voices. We're learning as we go. So we're all in this together. We're all learning together. And it's a really exciting feature of where this is all going.

5:15Brett Turner: Fantastic. Thank you, Brett. I have to admit, I've been very excited about this particular episode of the podcast. Nader, it's great to have you on. Maybe we can start off with an introduction and a little bit about your background, please. Thanks so much, Paul. Really excited to be here. Nader Suri, I lead our coverage practice in digital and corporate banking at BNY. For those who don't know, BNY is the world's largest custodian, a big payments bank, a big investment manager. Really excited to talk through this topic today. Fantastic, man. We always like to start here, our podcast was sort of an origin story.

5:50Brett Turner: And I'm not sure if you recall, but you and I have known each other for several years. And we originally bonded over the Beastie Boys documentary. I don't know if you remember that. That came out on Apple TV back in 2020, right around the time of the lockdown. Do you remember that? Oh, absolutely. Bonded over Beastie Boys. I remember I was like walking through Brooklyn and talking to you about it. And you were like, you kind of look like you're in a Beastie Boys video right now. So that was cool. That was exactly right. Yeah. Wonderful to have you on. As I said, I've known you for quite some time, at least back since 2020.

6:22Brett Turner: And you've always been an early advocate and an early believer in blockchain, digital assets and tokenization for banking and financial services in general. Certainly way before we had the sort of favorable environment we have now. And BLY has done some very interesting things in the space. And we definitely want to discuss that today. But I really want to go back to the early days, right? So I want to go back to how did you go about ruining the hearts and minds and the stakeholders over at BNY? And how did you build that internal use case to get BNY not only to look in the space, but really kind of play a role at the forefront over the last couple of years?

6:56It's a great question. Like, you're absolutely right. It has not been an easy road if you go back six, seven years. The origin story around, you know, how BNY got involved in stable coins. I think let's go back to who we are as a company, world's largest custodian, one of the largest payment banks in the world. We provide white-labeled payment services to other financial institutions. We're a large investment manager, over$2 trillion of assets under management. We're at the core of what's happening in the capital markets, whether it's being a collateral manager, whether it's clearing treasuries.

7:37And so, you know, a real market infrastructure bank that's core to the functioning of the global capital markets. When we saw what was happening with stable coins, which in many respects is just another new payment rail, it was quite obvious that because we're a big payments bank, we should get involved. But also those services I just laid out are the perfect pieces of the infrastructure to support emerging stablecoins. And so the initial project was the now defunct Libra stablecoin project, but it led to our public relationships with Circle and others. And it was really because those regulated players in the stablecoin space wanted a highly regulated and trusted infrastructure bank to support their activities.

8:31And so to win the hearts and minds at BNY, it was in tandem and in partnership with what makes us one of the most trusted financial institutions in the world. it's in tandem with the control teams, with compliance, with legal, and really bringing them on the journey to uncover what was really a new asset class for us to service and manage, but also to really understand how this affects the future of the capital markets and how we can be at the core of it.

9:01Brett Turner: That's fantastic. I was at PayPal and PayPal was also one of the original members back in Libra back in the day. What do you think then has changed from those early days till now? What makes this moment for stablecoins, tokenization, et cetera, different than what we've seen in the past? What do you think is the catalyst that we're now seeing almost every financial institution hiring folks to come in to look at strategy, building out pilot programs, or actually just diving in and launching new products and services for their customers? Yeah. I mean, listen, so I think it's like a few things that have happened.

9:35Obviously, Number one is more clarity around the regulatory environment. I think like it's still an evolving story, but we do have the Genius Act. It's established a federal framework for payment stable coins that gives institutions a much clearer basis for deciding how to and whether they participate. So big corporates, which we cover, Fortune 500 corporates, all of a sudden now have to understand how to potentially support this new payment rail. Secondly, I think the use cases are becoming clear. There are products and offerings that actually solve real problems. Tokenized money market funds, as an example, clients actually see value in making high quality liquid assets easier to transfer, easier to use as collateral, and potentially moving them and accessing them outside of traditional market hours.

10:32That's now a real use case versus just being somewhere you park cash after you've done some crypto trading.

10:39Brett Turner: And then I think, you know, institutional infrastructure is catching up. So banks, custodians, asset managers, they're all building production capabilities around custody, settlement, payments. You have the changes in regulation. We have the changes in the actual use case and then the infrastructure, which is driving institutional demand. And I think, you know, all these things are happening right now. Yeah, it's interesting that you say that. And I do want to go back to custody because if I recall, that was one of the first areas that the bank jumped into. But before that, I always like to ask this question of people on the banking side, like how much was the motivation fear of getting disintermediated and sort of like trying to find now, well, as opposed to that, let's figure out what the role should be of the bank in a regulated infrastructure that's connecting sort of that traditional financial services with this new digital ecosystem.

11:35I don't think it was a fear factor for us. I mean, listen, BNY is an interesting institution in the sense that we serve other institutions. We don't have a retail business. We don't have a commercial banking enterprise, we're solely focused on servicing our institutional clients and what they demand. And so the reality is when we built digital asset custody, and we were one of the first global systemically important financial institutions to do so, that was responding to client demand for that capability. It wasn't out of fear. And I think we take, and I personally take a view that it's not a zero-sum game.

12:19So like digital asset custody at BNY actually sits side by side with the traditional custody platform. And so when you're a customer at BNY and you're going to use digital asset custody and traditional custody, you're seeing it all in one place. It really doesn't change the experience for you. And so I do think like for us, it's all about providing optionality to our clients to enable them to enter new asset classes or enable new payment rails. And that could be even outside of crypto. I mean, we've seen the flourishing of private credit, private assets, and we've been at the forefront of that too.

12:55So to us, it's all about meeting institutional client demand.

12:59Brett Turner: Great. So I, and you mentioned, as we said, that you, I think the first major announcement was on the custody side, if I remember correctly, but kind of walk me through sort of that evolution. So you started with custody and then, you know, what, what till next, where did you see those opportunities and how did you build that portfolio of services to address those client needs? Yeah, so we started with custody because it really is the absolute foundational aspect. So we can custody digital assets within the same institutional environment like I just touched upon. We've always, number two, been interested in stable coins because I hear this term a lot.

13:35It really is the super app of the blockchain world. And so we've always been focused on actually providing the underlying fiat infrastructure of stable coins. But how that's evolved now is actually we recently announced with Circle the ability for our clients to hold USDC right on our digital asset custody platform. And they can instruct minting and burning through BNY. So that's a first evolution. And then on tokenization, we've announced the launch of our digital transfer agency capabilities, which we're already on the traditional side, a large transfer agent. And this extends it to digitally native funds.

14:19And so what really is happening is an expansion of the same architecture that we've had on the traditional side, but taking it to a more upgraded technology blockchain. And so that means more digital assets, more networks, more mobility, and deeper interoperability. I think the end state is, it's not a separate digital asset stack. The goal is for our digital and traditional assets to work together in the same financial operating model.

14:47Brett Turner: That's fantastic. As you know, I've worked with some financial institutions and providing some consulting services. That's exactly right. You can't build this on the outside. It has to be part of the entire sort of holistic view that the customer has. Speaking of your announcements and product launches, you had a very interesting one back in August, August 4th, I think it was, that you announced a partnership with Galaxy Digital, which we all know pretty well. Can you tell us a little bit about that, please? That was a great announcement because, again, it showcases the evolution of what we provide on the traditional side to the digital side.

15:20For us, staking does matter to institutional investors. And so as the digital asset market matures, clients are increasingly expecting more than simply the ability to buy and hold an asset. And so staking is a really important part of the economic utility of a digital asset itself. It allows holders to participate in securing the network and in return, they earn rewards. It's not too dissimilar from on the traditional side. We are one of the largest unisecurity lenders in the market. And so that's where Galaxy came in as a great partner. We're working with them to integrate their staking capabilities right onto our platform.

16:01They bring in the expertise that they've built. So again, you're seeing the evolution with partners of us becoming a one-stop shop for our clients. And so custody now is not just simply holding it, but it's actually putting your asset to work.

16:19Brett Turner: All right. So you've mentioned custody. Now you mentioned staking and other things that can cause regulators to ask some questions. And when we were at PayPal and we were launching PYUSD, the stablecoin, a big part of the job was going out and speaking to the regulators, both domestically and internationally, because they wanted to understand what we were doing. They wanted to understand the risk, because obviously PayPal is a regulated institution. Obviously BNY is. Tell me a little bit about that regulatory journey for you guys, because I would imagine that, again, today we kind of forget two, three years ago what the conversations were like.

16:57Brett Turner: And I think now folks have become a bit more educated on the technology and on the use cases. But tell me a little bit about what that looks like for an institution like BNY to sit in front of regulators and explain not only what you're trying to do, but why you're trying to do it. I think the really important point about that question is you actually have to sit down with regulators and you have to sit in front of them and you have to bring them on the journey of responsible innovation with you. And so for us, and this has always been the case, no matter what topic we engage our regulators on, they are partners with us on this journey.

17:33And they are partners with us on the journey of responsible innovation and financial services. Because you don't want innovation to come out of a world where the regulators don't have a say, where they're not viewing what's happening. You want them to be part of it. And I think that's what made E &Y an early adopter. But in a trusted and regulated way, we did it in partnership and in tandem with the regulators. And yeah, environments change. And so we're in the business of always being ready for any environments that we have to operate in, always with the perspective of serving our clients, but doing it in partnership with the regulators that oversee us.

18:17Interesting.

18:18Brett Turner: So you've used the word partnership several times. So I want to ask this question because, as I said before, in my opinion, and I think in most people's opinion, BNY has kind of been at the forefront from a banking perspective in this space. But you're also starting to see a lot of collaboration amongst banks. And they're starting to explore whether there should be some sort of network within the banks for tokenized deposits or deposit tokens. And then some banks are really, again, like BNY is taking a step forward individually or independently of some of those networks and groups. What are your thoughts there?

18:51Brett Turner: Because we have a tendency, I think you said it earlier as well, we have a tendency in the industry to put A versus B, stable coins versus tokenized deposits, or back in the day, Bitcoin versus Ethereum, or X versus Y. And I think a lot of folks continue to do that. Should it be a consortium network approach? Should it be just doing it individually? What are your thoughts on that? And how do you go about addressing or evaluating those opportunities within the bank? I'm firmly in the coexistence camp here of the whole kind of stablecoins versus tokenized deposits versus tokenized money market funds.

19:23All these things solve sometimes overlapping problems, but they're economically and legally different instruments. Like a tokenized deposit is still a bank deposit represented on a digital infrastructure. A stablecoin is issued under a totally different legal structure and backed by reserves. Those differences matter. They matter for balance sheets. They matter for regulation. They matter for liquidity. And they matter for how institutions use them. I can see, for example, a corporate treasurer who wants to accept a stablecoin because perhaps a vendor wants to pay them in a stablecoin. And now all of a sudden, they accept that stablecoin, but then they want to convert it to something yield-bearing.

20:05perhaps they can do that with bank deposits you know that on a digital form or perhaps they want to use a tokenized money market fund and perhaps they use both all in the same day that's not too different actually from what a corporate treasurer does today a corporate treasurer takes in a payment via ach or wire and they invest it per their investment policy statement which is either in a deposit in a money fund or maybe they're buying treasuries or other short-term fixed income assets So again, I think it's not a question of which instruments is going to win. It's, yeah, I think I said this before, it's not really a zero sum game.

20:44It's an evolution of the instruments that are available to clients today. And so that could be because you have a particular relationship with a bank. You may want to go into a tokenized deposit or perhaps your investment policy statement states you should only be X kind of money fund. Then you have a tokenized version of that as well.

21:05Brett Turner: That makes a lot of sense. Like you said, it's not a zero sum game. And I say this to folks all the time, it's way too early to start picking winners and losers in the space. We have no idea how things are going to evolve. When you and I first started looking at stable coins, again, it was a trading use case to go in and out of volatile currencies. And it was$4 billion in market cap and now over$300. opportunity. Let's go back to that corporate treasury because you mentioned it a couple of times. There's certainly a lot of excitement about digital assets and tokenization and corporate treasury, but what do you think are sort of the biggest barriers today that are sort of preventing those digital assets and tokenized money from becoming part of everyday corporate treasury?

21:43Brett Turner: Is it regulation? No problem intended. Do we still need clarity on what the regulation is going to be? Is it the technology? Is it just education? Is it the other tools that they need for risk compliance? How do you view this in terms of what does the industry need to start really getting adoption at scale on a corporate treasury standpoint? I will use the term that you use, which is it's still early days, but a couple of barriers are just like natural when it is early days. So number one, it is about ubiquity. So naturally right now, corporate treasury is thinking, okay, we're getting more regulatory clarity.

22:21Now I have to think about what stable coin do I accept? Who is it issued by? Is it federally regulated issuer? Who's going to help me support that enablement of stable coin acceptance and disbursement? Is it a bank? Is it not a bank? Is it someone I trust? And so these are complicated questions actually. And so that's why we really strive to make it easy for clients to figure that out. Like the infrastructure is available through digital asset custody. We're obviously a bank that's well known to many corporates around the world. And then like you have tokenized options as well.

23:02Paul Bances: That is one barrier. There's the ubiquity. Is it there? And then once it's there, now I have to set up like a new infrastructure sort of. And so that's one. I think regulation is helping. So I don't think like that's a true barrier at all. I think the final one is how does this all connect with like the existing systems, the existing treasury management systems, the URP systems, the bank accounts you have, the liquidity policies. We just talked about like the investment policy statements and tokenized money market funds. Just saying like, yeah, here's a wallet. It doesn't solve any of the problems that a corporate Treasure has.

23:37Brett Turner: What they really need is deep integration of that wallet into their existing platforms that make things work today. I think that is going to be an evolving story, but it's certainly a barrier today. And obviously here at Travada trying to solve those problems for Corporate Treasure, we used to say this even back at PayPal, you can't build something that's outside like a speedboat outside the carrier. You got to build it as part of the carrier because if you force folks to adopt new policies or new procedures outside of what they're traditionally doing for their cash management and treasury, it's not going to work.

24:10Brett Turner: You can't expect folks to upend everything that they're doing. It has to fit holistically into what they're doing today. So I definitely agree with you on that viewpoint. You mentioned stable coins and issuers and all of that. So now I'm going to ask you, forget your BNY and just talk to me as the expert that you are that I've admired for several years. I often refer to this time now as you're going to see a renaissance period of stable coins. Everybody is going to launch their independent stable coins for whatever their motivation is, whether it's because of the underlying economics or whether they believe they want to make a proprietary coin because of their brand.

24:44Brett Turner: Obviously, that comes with a lot of risk. As you said, a lack of interoperability or a lack of sort of liquidity for each, then you're creating sort of these walled gardens that we've had in the fintech side, for example, for several years. Your personal opinion on this, where do you think all of this lands? Do you see a world where it's one or two stable coins are going to run on a long enough timeline with a couple of others that are niche or is there some sort of clearing house in between? How do you think this whole sort of ecosystem evolves in the next couple of years? It's an awesome question and honestly I wish I had the answer Paul because in all candor I think that there's obviously a couple of stable coins already that have developed the trust of the market and that have built out the regulatory requisites to be trusted.

25:36I think that's just, they were early, they built scale, they're trusted, and you can continue to see them evolve and grow. I think you're already seeing other consortiums, and we were part of the Open Standard Consortium. We were listed there publicly because we do think there is going to be new stable coins out there that offer a different use case and offer a different value for its end users. And I think that's good. Competition is healthy. Competition is good for the market. And I think it's good for us to be part of that. I think you will see one or two other big projects. And honestly, it doesn't preclude others from issuing.

26:12I do think, though, that it's important, and this is applicable to anyone running a business, that you really focus on your core capabilities. And so for like non-financial corporates to suddenly want to issue their own money sounds a little strange. And I think it detracts from their core principles. However, can they be part of and use a stable coin as part of a consortium or as part of another mechanism? Then yes, absolutely. And if it offers value to their end business, then great. I don't mean to be this like the truth is somewhere in the middle kind of guy, but I think in this case, that's true.

26:50Brett Turner: I think you're right. And I think people underestimate sort of the effort that comes after you issue a stablecoin. The issuance is actually quite easy now. The technology is sound and we've seen that over and over again. But again, back at PayPal, once we issued, then the real job started, which was building out the ecosystem support, the liquidity, the on and off ramps, all of that. And I think people underestimate how much time and effort it takes to be able to build that sort of ecosystem support. Well, we could do a whole podcast of you telling us how much effort it took on that front. Yeah, yeah, yeah.

27:26Brett Turner: No, definitely. So going back again on your personal side. So what excites you about the next couple of years here? What are the trends that you're seeing that say, I'm in the right place at the right time, and it's exciting for me to work in this space? What are the trends that you think do have the potential of really transforming or evolving financial services as a whole? It is an exciting time. I think like number one at BNY, we've been serving corporate treasury and large corporations for years. We operate, you know, one of the largest investment portals in the world, Liquidity Direct, and it offers corporate treasurers the opportunity to invest their excess cash.

28:05And I think the evolving nature of tokenization is going to make that platform much more profound for corporate treasurers who now can actually think about receiving money in one geography and converting it in a 24-7 format. I think we don't talk about this enough. I think it's going to be like a really powerful tool for large multinational corporate treasurers. And then I think the other thing that excites me is the ability to move collateral at a faster pace. I mean, it just unlocks an incredible amount of value, an economic value that sometimes is trapped. What it does to trade finance is like another evolving story.

28:47But finally, on the personal front, like, listen, I think the ability to send and receive money, even on an individual basis, cheaper, faster, offers enormous value to society. Agreed. And that I think for anyone who's ever had to send money overseas, and yes, there are good platforms that do this, but anyone that needs to send money to someone in need or someone overseas, I mean, this is a great development for the interconnectedness of the world and people sending and receiving economic value to each other.

29:27Brett Turner: I couldn't agree more. You and I have very similar viewpoints on that and sort of the fundamental aspect of being able to provide for family and friends and the possibility of this technology for financial inclusion. I'm also excited about that as well. So, Nathan, thank you very much. Appreciate you being on. This has been fantastic. Lovely to get a banker's perspective, especially one like you that's been at the forefront. I applaud you for your success, both individually and part of the institution as well. I think you guys have always been the adults in the room, as we like to say. And as a result of that, you've helped the industry overall over the last couple of years.

30:01Brett Turner: So, thank you again for being part of the podcast. And I look forward to seeing more announcements come from the bank. Thank you so much, Paul. I really appreciate this time today. Absolutely, man. Thank you. See you.