Bank of New York Mellon report: digital assets from the edge to the future

Digital assets have clearly entered the mainstream. The latest report from Bank of New York Mellon outlines the evolution of digital assets, how they can help reshape the financial ecosystem, and highlights the infrastructure and collaboration required to help digital assets reach full maturity and seamlessly integrate with traditional assets.

Many financial institutions around the world have either been working hard to integrate and expand their digital asset-related products and investments, or have realized that they can no longer take the “wait and see” approach. As they develop strategies, they are still seeking digital assets to provide the value of disintermediation assets. But they are also looking for the risk management and security infrastructure they expect from mature institutions. In essence, investors require the infrastructure of digital assets to be comparable to the infrastructure of traditional assets.

There are three key considerations driving this demand:

The interest in digital assets continues to increase : in August 2021, the global market value of cryptocurrencies exceeded US$2 trillion, more than double the value of the end of 2020. In other words, after just ten years of existence, the global market value of cryptocurrencies has reached about 20% of the global market value of gold. For most of modern history, gold has been the world currency reserve asset champion.


The emerging potential of tokenization: Tokenization is a process in which basic assets, tangible or intangible assets, are converted into digital “tokens” as intermediary assets. It is possible to tokenize a wide range of assets, from cash, equity securities and debt securities to physical assets such as real estate, commodities, crafts and art. This development opens up potential innovations in areas including custody, collateral management, cash and liquidity management, fund management, accounting and payments. In an August 2021 study by the Bank of New York Mellon, 72% of institutional asset managers stated that they plan to develop solutions for asset tokenization.


Evolving regulatory environment: Regulators are working hard to bridge the gap and promote the consistency of the digital asset regulatory environment. For example, in 2020, the European Commission published draft legislation to create an EU-wide framework for digital assets. It is estimated that the “Encrypted Asset Market Regulations” (MiCA) will begin to apply in 2024. In addition, in the United States, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) are conducting an inter-agency cryptocurrency “race” to develop a joint framework for cryptocurrency regulation.

Incorporate digital assets into the traditional ecosystem

As the relevance of digital assets has become increasingly clear, the need for institutions to provide a stable and secure global infrastructure is obvious. Investors expect to obtain the same level of institutional services as in traditional fields. In addition, various types of institutional stakeholders require stable and reliable services for the entire asset life cycle, from issuance to custody, trading, and settlement to core financial services, accounting and payment. These requirements can be divided into three categories.

Trust and financial soundness: Given the potential of the digital space, institutions are seeking the same level of risk management as traditional assets, attention to regulatory compliance, and strict safety and security standards.

Completeness of infrastructure : Institutions are looking for scalability, transparency, and a full range of support levels to help them manage the risks of the digital asset ecosystem. Regulatory reports from multiple jurisdictions, market flexibility, and experience in handling complex institutional scale scenarios will differentiate some suppliers from others.

Seamlessness: Institutions hope to have a one-stop service to support the expanding use cases of digital assets and provide value (such as trading, custody, collateral management, and lending) throughout the financial life cycle of digital assets.

Since digital assets and the market are closely connected in nature, meeting these requirements requires close cooperation within the industry and with financial technology suppliers. In the world of traditional assets and markets, asset owners, asset managers, institutional investors, and service providers have worked closely together. In the same way, cooperation is also crucial for the full maturity of digital assets. If technology developers, financial infrastructure and service providers, and stakeholders in the entire value chain jointly create and deploy an ultimate integrated solution, rather than a simple one-time innovation, then the final result we get will be even stronger.

Just as traditional markets develop through cooperation between stakeholders, we believe that digital assets must do the same, albeit at a faster rate. Decentralization is an inherent feature of the distributed technology that supports digital assets. When we stand on the edge of institutional readiness for digital assets, we expect the emerging world to be “polycentric”, with global institutions and their collaborators playing their roles. This new ecosystem must be based on trust and innovation, and it will provide important growth opportunities.

The Bank of New York Mellon also pointed out in the report that from 2017 to 2021, many blockchain companies have grown into unicorn-level existence in the capital market.


“Digital assets are changing the world and are increasingly becoming the mainstream of our financial ecosystem. At Bank of New York Mellon, we are committed to using centuries of trust and innovation to build a bridge to the future.”

-Roman Regelman, Chief Executive Officer of Asset Services and Head of Digital


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