Welcome to METACO TALKS – Live conversations with the people operating at the frontier of crypto innovation: entrepreneurs, bankers, investors, fund administrators, traders, analysts and other crypto and digital asset market participants. Our objective is to help the broader ecosystem navigate this complex environment and unlock the market opportunity.

This podcast is hosted by METACO – the leading provider of security-critical infrastructure enabling financial institutions to enter the digital asset ecosystem.

Our guest is Lory Kehoe, Director of Digital Assets & Blockchain at BNY Mellon. Lory is an outcome focused, data-driven, hands-on experienced executive with over seven years global blockchain and digital assets experience and has delivered production blockchain implementations for global financial institutions, as well as many pilots, prototypes and PoCs. He is a seasoned published thought leader on blockchain and fintech in The Financial Times, Forbes and across Irish media. He played an active role in establishing The European Commission’s global blockchain group, INATBA.

[00:02:20] How does BNY Mellon see the digital asset space evolving?

[00:05:36]  How difficult is it to move the BNY Mellon ship to focus on digital assets?

[00:16:15] How do you culturally innovate in a big bank?

[00:23:13] Can digital assets be compatible with ESG?

Disclaimer: This is not investment advice.

Full transcript

Craig: [00:00:00] Welcome to METACO TALKS. My name is Craig Perrin, I’m the VP of Sales at METACO. This is a weekly discussion, topical issues, thought leadership related to digital assets and cryptocurrencies. The recordings will be on the website as usual. Please subscribe for future events, and we look forward to hearing your reviews.

Today, I’m joined by Lory Kehoe, Digital Assets and Blockchain Director at Bank of New York Mellon. Lory, good morning. Happy Friday!


Lory: Good morning, happy Friday!


Craig: How’s it going?


Lory: Things are going good, despite it being absolutely miserable in May here in Dublin. I have no other words for it. It’s been fantastic but the weather needs to start playing a bit of ball for us over here. What about you?


Craig: I have to say, I’m currently in London, and the weather is a bit gray and gloomy as well. I share the pain. Hopefully we can brighten the Friday morning with some good conversation. Lory, just very quickly before we kick off, a couple of quick points on your role at Bank of New York Mellon, outline that for us. That’d be great.


Lory: I joined the bank back in January. I have been working in the blockchain space and digital asset space for nearly eight years. Started out doing work in the blockchain area with Deloitte, and then helped build Deloitte’s blockchain lab based at Dublin, with some great people. Did some work in Hong Kong, doing something very similar. Then joined Consensus, which is focused on the Ethereum platform – helped build the entity in Ireland.

I was very fortunate to get to know some of the folks in BNY Mellon over the years and in my time with Deloitte and with Consensus as well. I was very fortunate to join the bank back in January. I’m part of a team of folks who are in the digital assets unit. We’re really helping the bank execute on the digital asset initiatives in all parts of the business.

I’s a case where I’m not alone, there are many of me that work in a way, developing products, listening to clients, and helping to bring our solutions to life/


How does BNY Mellon see the digital asset space evolving?

Craig: [00:02:20] I have spent many years in my career working on the opposite side of the table to Bank of New York Mellon. But I know the organization very well as a very formidable global custodian. How does Bank of New York Mellon now see the digital assets space evolving? Clearly a leading global custodian in the traditional asset space, but how is that evolving? How’s the view of Bank of New York Mellon evolving in the digital assets space?


Lory: The way we look at it is very much as evolutionary rather than revolutionary. I think this goes back to what the bank has been doing for many years. I’m still learning about the bank’s history and what’s going on. For over 230 years the bank has been innovating, creating new products and services. But ultimately, Craig, much like your role and your roles in the past, it’s about listening to clients, understanding their needs, and about developing solutions.

We see digital assets as an emerging asset class, but for us we’re proud to be part of the digitization of this area in the same way you guys are. That’s for us I think really exciting, what our clients are excited about, and personally. That’s the fun part of my job.


Craig: You mentioned clients. Obviously you guys will look off to some of the biggest asset managers, insurance companies, pension funds globally. How is the underlying demand, and what do clients ask you for?


Lory: Great question. What are we seeing here? I was chatting to some clients yesterday around this. I think I’d probably put it into three categories. They’re looking to understand what’s going on. That’s probably number one. After our announcements that we said in February, that we’re providing digital asset custody, they’re looking to understand what that means, what that looks like? They’re understanding to learn more in general about digital assets. Then finally, they’re looking to partner. We’re all on this journey together, and I think the privileged role that I have and that the bank has is that our clients are coming to us, looking for us to be a trusted advisor in relation to this technology.

It’s different to what’s there today. Our job is to try and help them navigate: what’s going on? How does it work? When are services available? What are the other considerations?

The demand that’s there really has been growing and building for several years. What I would say, is a few years ago one or two clients coming out in relation to looking for custody services or other services in relation to digital assets is interesting. But as that drum beat grows consistently over weeks and months, then it becomes an imperative for us.


How difficult is it to move the BNY Mellon ship to focus on digital assets?

Craig: [00:05:36] A lot of the organizations, banks, of a tier one science are very much led by client demand. I understand very much your points that you made around what clients are looking for. Is that what’s driven the business case at Bank of New York Mellon to move into digital assets?

Clearly there has to be an underlying current demand, there has to be a market space that the management team believe in. But is that what has built the business case, or is there other components?


Lory: 100%, I think that’s the major driver here. It’s not a case where I’ve come into the bank, jumping up and down and saying this is important. That would be interesting. But what we are seeing is, right across all lines of business within the bank and from all our different client types, we are seeing interest in relation to digital assets.

Like any product company, like any service company, like any startup out there as well, what’s the core to your business? The core to your business is to understand what products or services you have today, what are your customers looking for, and then how do you carefully listen to them? This is something that I think is an underestimated, underused skill – but carefully listen to them as to what they want. Then start documenting what that is, and start developing or co-developing solutions so that you have products and services that meet their needs.

For me, I think the older I get the more important it is for me to shut up and listen. I think I’ve also surrounded myself with the folks in the team that I’m in, there’s a team of great listeners and I’m picking up their tricks of the trade as to what questions they’re asking so we can get to the real detail as to what are the things that are really important to build. That’s what we’re listening to, that’s what we’re building, and that’s hopefully the products that we’re going to create.


Craig: You mentioned the business division that you’re part of. I spend majority of my time talking to clients about the creation of capability to support client demand. A lot of that client demand is not coming within banking for one particular business area. For example, is it the custody, the sub custody, the direct custody business, which is so large at the Bank of New York Mellon, that’s looking to facilitate that product development?


Lory: I think after our announcement; it was in the front cover of the Wall Street Journal: America’s oldest bank is getting into digital assets. I think the focus initially was on custody, but really what we’re doing is we’re building a multi-asset platform to meet the needs of our clients across all lines of business.

Custody is a foundational component, there’s absolutely no doubt about that. The custody team is doing fantastic work to build that solution and be the first part of it. Whether it’s treasury services, whether it’s issuer services, whether it’s markets, whether it’s Pershing within the bank, it is across all areas.

The way we’re organizing is that there’ll be folks like me dedicated to the different lines of business, to work with that line of business to help develop products and services for that line of business to meet their specific customer needs. That’s how we’re doing what we’re doing.

In terms of the different client types, whether it’s asset managers, unsurprisingly they’re very interested in the area. We’ve seen asset owners, a lot of interest from those folks as well. From corporates we’ve seen a huge amount of interest as well. Then also from digital native or crypto native companies.

Let me tell you, I’m busy. I’d definitely say that. I know you’re busy as well. I think everybody in the world is busy now, and we’re on Zoom and Teams and Google Hangouts and all these different conference calls all day. I’m meeting folks in Australia or Southeast Asia early in the morning here, Dublin time. Then I’m wrapping up with calls with folks in California later in the day. That’s for me exciting, interesting, and most of all it’s an opportunity to learn what our clients want to do, and then get into building those solutions.


Craig: [00:10:17] It is exciting. You’re involved in the creation of a new business lineup of a product expansion. I guess a name like bank of York Mellon is trusted by many, and that’s a key factor in terms of clients wanting to understand what you guys are doing.

You’ve also been very visible in the market in terms of the announcements that have come out around steps that you’re taking in that space. That in itself is, is obviously driving interest. But clearly, launching a product like crypto custody capability and the associated connected elements of that inside a bank like Bank of New York Mellon, I’ve worked in banks, they can be phenomenal vehicles to create products, innovation within banks is something which is a key component these days. But it still has to be a complex project to launch. How are you navigating the various business lines to bring agreement to deliver?


Lory: A very fair point. And we are; we’re a big business and there are lots of moving parts to the different lines of business and into everything that we do.

For me, honestly, and a big reason why I took the role in the first place is – and the older I get on this point as well, I’m sure you feel the same – it’s funny just the importance of leadership. Working with people who have executed change programs and product development initiatives in the past of this scale and nature is absolutely critical. I am fortunate to work with my boss, Mike Dempsey, who has been in the industry for a long time now and has executed a number of projects. For me, it’s folks like Mike, it’s Caroline Butler on the custody side, who have done these things in the past and know how to get it done, and know how to get it organized.

I think it’s that traditional mix of having leaders who have vision, but also the ability to execute. Also, I think it’s getting things organized. Hopefully I’ve got through the good folks at Accenture and Deloitte where I cut my teeth and learned a lot from in terms of projects – it’s helping to shape things, helping organize so that we can move forward.

As a bank, we move on a very surefooted basis, as you know, and we need to do things in a very considered and measured way. It’s absolutely essential that, like an orchestra, we’ve got unbelievable conductors who know what the plays are, know how to get stuff done, then for the rest of the business to row in behind. I think that’s what we’ve got.

There was a great study done, it’s a Harvard business reviewed article about this, about the importance of leadership. It said the variability of performance of a team can be up to 50% based on leadership. I read that article recently, and I was just blown away by it. It’s coming from a psychologist based on research and studies. I think that the older I get, the more importance I place on leadership; working for people that you want to work for, that helps/.


Craig: I hear you. I think your leadership is without a doubt critical when you move into a new area. There has to be confidence at all levels to deliver that product, particularly in an area which is somewhat groundbreaking for mainstream global custodians to drive into it.

When you joined, you came from a background away from the banking circle. Was there a significant learning curve for many of the leaders inside your organization to really understand the business case? Or was there a lot of support early on?


Lory: To be honest, support, and even more so than I anticipated. When I came to the bank, we’d been having discussions but only when you’re in the door properly that you fully learn what’s going on, what the strategy is and how we’re organized to execute against it on the different initiatives that were in flight.

To be honest, the support that’s there from the top (from Robyn) is absolutely 100% evident. There’s no doubt about that. What you’re seeing here is, Roman Riggleman coming from a consulting background absolutely focused on digitization. I think that is permeating through the bank. There’s the desire to digitize, there’s an opportunity to create innovative digital products, you have support from Roman, and then Mike has put a team together to help execute that and I’m part of that team. But genuinely, did I have hesitations? Like any job, when you move into a new role it’s always interesting to see and learn what’s it going to be like, as opposed to what you think? If anything, there’s more support than I thought there would be. There’s more activities taking place in relation to digital assets than I thought there was. And, there’s a bigger amount of people working on these initiatives.

Genuinely, not giving you a party line, I think that exceeded my expectations.


How do you culturally innovate in a big bank?

Craig: [00:16:15] It’s interesting listening to you. The level of innovation as a culture now within Bank of New York Mellon. It feels like it’s at a real core level. Are you impressed coming from the outside, from joining in now, that the level of innovation and focus on developing in that space within a bank that traditionally has been very focused on the traditional asset space, to now have that level of innovation as a culture across the organization? Feels pretty strong.


Lory: It does. I think this goes back to what the bank has been doing for a while, and quietly so. It’s building up a bench of talent. I’m one small part of a team of people who’ve come from different technology companies, who’ve come from consulting backgrounds, who I’m certainly learning a bunch from. I think back to what I know now versus where I was four months ago, based on the people and that I’m surrounded by, it is a lot of very knowledgeable people, and that’s what’s driving things forward.

I think there’s an opportunity with digital assets in the same way there was. As the banks have evolved over time to go from bonds to equities, real estate, there’s been these big moments in terms of product development and product services. Digital assets we see as being another form of asset class. There’s an opportunity here to think about, what are the products that we can develop around this new asset class? For me that’s what’s getting the creative juices flowing.


Craig: To that point, do you view the digital asset class as an add-on now to run alongside the traditional space? There’s been a number of organizations theoretically ring-fencing the vehicle, potentially slightly away from maybe the parent, in some shape or form. But do you expect your launch to come very much alongside the traditional business?


Lory: It’s definitely the latter. We see it as being an extension of our existing services. It’s core to what we do. As part of our digital journey, digital is a massive component of everything that we do. We’re looking where we can to automate everything that we do, and there’s a lot of work done and still work to do.

But definitely there’s a capability in the team now where we have a dedicated team of artificial intelligence and data scientists – a team of PhD folks who certainly make me feel like I need to do a lot more on that front. But that’s just an indicator of the focus that the bank has on digitization. Digital assets is another part of that focus.

I think that does go back to looking at what why Roman is being brought in. it is to digitize the bank. Looking at automating, but then looking at also other digital or digital related opportunities. It is cost saving, but also revenue generation focused, which I think is an interesting narrative.


Craig: As you get some launch, in terms of the hurdles that you’ve got to cross between now and the product being live and available for clients, how’s the regulatory framework impacting you? How is that creating either challenges, or directing the next steps?


Lory: [00:20:04] What I’d say on this one is that as the regulatory environment continues to evolve around the world, our job is to ensure that our products and service meet any and all requirements associated to those. That’s the focus. We have a team of folks who know far more about regulation than I do, who are regulatory experts, and they’re helping us understand what the requirements are and then ensuring that we meet all those specific requirements in every jurisdiction and geography that we operate.

I think, what I close out on that one is, it continues to evolve, but we’re laser focused on it.


Craig: One of the key components in the traditional space, particularly for a global custodian, there is an element of obviously global geographic coverage assets held in 100+ markets, giving your clients huge global access. Obviously under that comes that sub custody framework and the connection of sub custodians into each of the markets. How do you see the concept in the digital assets space, of either sub custodians or partners, platforms, relationships outside of Bank of New York Mellon that you will then partner with or work with to deliver your underlying product to your client base?


Lory: This is a really interesting question, and interesting for me in many different areas. Ecosystems is a big thing I’m interested in. I saw it of BNY Mellon and work and that I do with Trinity College Dublin. But I think around partnerships and ecosystems, this is something that I didn’t realize until I came into the bank, that we have a dedicated partnerships team, who look at making strategic investments, but also evaluating the broader ecosystem as to who’s out there that we should be working with.

I’m still blown away by the teams. Effectively, what they do all day, every day, is they’re meeting with companies. They’re scanning the horizon across different lines of business, digital assets being one area, to understand who’s out there and what are they doing? They set up meetings and they listen endlessly to what these companies are doing. Then, does it make sense for us to be using these? Then they will link in with the different parts of the business to say: look, we’ve come across this company in relation to transaction monitoring, and we think this would fit neatly with what we do already, would you be interested in having a chat? Then we have a chat and we see if there is a gap and we think there’s an opportunity to use that service, then how do we integrate?

For me, that is an area that I had been genuinely massively impressed by, as to the proactive nature, that there’s people dedicated to understanding what is going on in the broader space. It’s not always the case where people are contacting you through LinkedIn, you’re saying, “Look, this is my product,” blah, blah. We have a proactive team dedicated to doing that.


Can digital assets be compatible with ESG?

Craig: [00:23:13] Lori, we’re coming up on time, just literally a couple of minutes. There’s been a lot in the digital asset space, around ESG in the banking space. How can digital assets be compatible from an ESG perspective? It’s an interesting topic, one which will continue to be debated, but any thoughts from you would be interesting.


Lory: Yeah, I think this is another rapidly evolving area, incredibly interesting. What I would say is that, first things first, when it comes to digital assets and ESG, and mining specifically, the key thing here is to understand what power source is being used to empower the miners? That’s the first thing. Is it renewable energy? How can we work collectively in this area to figure out and push the agenda that renewables have to be the source of the energy for mining? Smoky coal, that’s not good enough.

We need to figure out collectively as to how we make that just a go-to standard. I think that’s then becoming part of the solution.

Another factor here, which I’m sure you guys agree on this as well, is the move from proof of work to proof of stake. A lot more energy efficient consensus mechanisms, and that being a prime example. I think that’s a second and very important factor.

The third point that I’d say is, I think through the partnerships team that I just mentioned there, we are actively looking for entities out there that are doing interesting work to help solve this problem, and how can BNY Mellon be part of that solution?

There’s some companies out there that are looking at some really interesting ways of redistributing the heated – actually what’s happening is there’s air basically flowing over the Bitcoin miners. Is there a way to redistribute that hot air for it to be used for other purposes? A potentially beneficial by-product from the mining. An evolving area, but we are really active and trying to figure out how do we become part of the solution. That’s probably the real focus.


Craig: It’s a topic which is continually going to be debated, and one which I think is important. Banks like yours are at the forefront of those discussions, and I think collectively the conversation will continue.

Lory, I’ve really appreciated the conversation this morning. Any final thoughts in terms of your focus for the next few months?


Lory: No. I think it’s just keep the head down and keep doing what we’re doing. I think that’s probably the main thing. We are busy on a few fronts, so it’s the focus on the build for our custody solution. Yeah, hopefully enjoy a bit of downtime over the summer as the weather gets a bit better, and vaccinations increase and the world opens up a little bit.

Final toll for me is wishing Ipswich town all the best.


Craig: Indeed, we all do. Lory, I appreciate. It’s been fantastic to get you on. Grateful for you taking the time. Thanks very much.

The next METACO TALKS is on the 28th of May. We have Kalin Nicolov, head of digital currency at SICPA joining us then. Until then, thanks very much for joining.