Amy Oldenburg, Head of Digital Asset Strategy @ Morgan Stanley

Speaker 1  0:00  

Yeah, so I will apologize in advance, because I will definitely do a worse job than Simon would have, but we'll, we'll try to make it work, and with someone and as great of a guest as Amy, I'm sure this will be an awesome conversation. So I do. I was reminded that I have to say these two things first. So, you know, bear with me, but the views or opinions of our contributors today are their own and do not represent or necessarily reflect the opinions of their companies, and nothing should be taken as tax, financial investment or legal advice, and do your own research. So I also told that I need to tell you that this interview is made possible by mesh and visa. So that's my my assignment impression for the beginning here, but maybe we'll get into it and start with the questions. But Amy, congratulations on the new role. Thank you. I'm sure it's been a bit of a whirlwind. Can you just like start by telling us, what does digital asset strategy mean to Morgan Stanley, how are you thinking about the space? What does the roadmap

Speaker 2  1:06  

look like? Rob, good to see you. And I have to just say, I have to tell you how many times I probably fall asleep to your voice listening to podcasts while I'm traveling.

Unknown Speaker  1:17  

More interesting.

Speaker 2  1:18  

It's really nice to be sitting next to you and hearing your voice versus falling asleep in some country around the world. So what does digital asset strategy mean to Morgan Stanley, you know, we've been working, we've been on this journey for good. Someone reminded me, I think, almost 10 years. So this has started with, you know, Blockchain, DLT. I'm really trying to understand how we can use this technology a very long time ago, to looking at partnerships across market infrastructure, to cryptocurrency onboarding. And finally, last year, we've really been able to start turning this on. So I would say digital asset strategy. Strategy encapsulates everything from, you know, Spot crypto trading, any sort of derivatives, and then full digital market infrastructure, so that's tokenized assets, and all of the different changes that we need to make in the business to be able to support that going forward.

Speaker 1  2:19  

So I remember, I was on the first kind of, like working group at Goldman, looking at this space. This was 2014 and the there was conversation then about, like, you know, tokenization. And there was a business called axoni, which I think Morgan Stanley would have also been involved with, which was, like the first high yield credit on chain. And this, so this is, to your point, not a new conversation, but it does seem like newly reinvigorated. How have you seen that change recently? And what have you seen, both in this role but also in your earlier roles? As you know, people talking about the space, yeah.

Speaker 2  2:54  

So prior to stepping into the digital asset strategy role at the firm, I was running the emerging market investing business. And, you know, this is not everyone talks about the whole idea of like, even in emerging markets, they never had fixed line and went straight to mobile. And we saw, like, how these themes play out in certain ways around the world. And I think we're kind of dealing with that with, you know, with how value moves across the world too. I know you've spent a lot of time in payments. I mean, you know, some of the models that we've seen in Brazil, Southeast Asia and elsewhere, and we didn't really need that to the same extent in the US, because, you know how much credit card penetration there is in the US. I mean, it's just easy. We already make it we already make it reasonably easy, but we're starting to get to a point that as money moves faster, as people live 24/7, lifestyle, why isn't the rest of your life, including the value your assets and everything else available in that same context? Now, if you are rich, obviously you have a lot of different services available to you that may feel like it's 24/7 already, but for the broader population, both in the US and elsewhere, there's still a lot of services to be had. We've talked a lot about things like remittances. I mean, I think with stable coins, if we go down that path like anything from remittances to payments. I mean, some of these models in the past were really not very client centric. I mean, it was definitely to provide a service and then rip the client off. So there's far better models that we can look at. And I think as we start, as we continue to open up that that infrastructure and look at the technology, we can see it's a we can apply it in many other ways to continue to make our markets more efficient, even in developed markets.

Speaker 1  4:49  

When you think about the space, a lot of the conversations I'd had the last few years with, you know, not necessarily Morgan Stanley, but I think the broader, you know, Financial Services Committee or. Group of people that are participating in this space. A lot of the conversation has been around cost cutting, and you know, how you can automate, you know, back office function. Now it seems like, you know, there may be, there's revenue opportunity as well. It started with maybe ETFs, that's something you've been involved in. But how do you see about your your role? Are you, you know, a cost cutting executive, or are you a revenue generating executive? And how do you think about, you know, the future of what that looks like at Morgan Stanley, ooh, this

Speaker 2  5:26  

is, like a really, like spicy question, because you can get, I think the interesting thing and we, and we were talking about it in the green room before, the thing that I am an evangelist on in this future world is that. And you know, growing up in the traditional finance industry, it didn't matter if you were in investment banking or in asset management, there was this concept of like, front office, back office, and what part of the business are you in? I think the hard part is, in this environment going forward, we really have to break down this bias of front office, back office. I continuously pull in my cyber security team, the ops folks, the tech folks, before we even start looking at product development, because it's so critical to just change the whole business model of how we look at things. And I think that's like, that's a cultural shift. So I'd say, like, above all, like, trying to change mindset and culture is like, first and foremost when you go into cost cutting, like, nobody wants to tell you, like, oh, I can save you 10,000 heads. Although I will say, after our TMT conference couple weeks ago, this pressure on the future of workforce that's not coming from the digital asset side that's coming from the AI side. So, you know, we might have to play some of the angle there that well, digital assets can really cut back on some of these costs, if you're worried about that, like future of head count. So, you know, I think that's where we have to take kind of a broader lens to say some of this, you know, might come AI is usually in their lane, and digital assets usually in our own lane over here. I still am very committed to at some point, I think this whole narrative comes together, and we start to see some convergence of like the AI and digital asset narrative come through. So I think, you know, it's, it's everything, it's, it's culture, it's product, and it's and it's cost cutting. We're gonna

Speaker 1  7:22  

talk a little bit about agentic payments in the next panel. So stick around for that. So how should I think about in your business? You know, obviously you guys have already supported the ETF trading and so, you know, there's the asset management side of your businesses, the wealth management side of your business, the institutional services. Where should I see crypto and blockchain play a bigger role, and how should that roll out across the different business lines?

Speaker 2  7:46  

Sure. So I've said on many panels that, and since we're talking with our personal views here, I am a long time personal like spot crypto holder, coming from 26 years in the emerging markets business, but I do believe there is a place, any any use for for ETFs and ATPs. And we found, like, one of the reasons why this resonated so well with the marketplace is because it's just able to be used with the traditional infrastructure. It's easy, it plugs in, it gets people the exposure they want, from like a price perspective, reminding them that they don't actually hold the underlying Bitcoin or other, whatever other asset, but they have that exposure, and it's easy to use. We really started that journey pretty much quickly after the etps. The first etps were approved. We announced in August of 2024 solicited ETFs within our brokerage business, you know, really slowly stepping into that now this year, turning it on or, sorry, in 2020 26 turning that on for advisory business too. But I think one of the things that's quite interesting, even though we've turned that on within the wealth business for the ETP exposure, a lot of it's still coming in self directed. So that's on the E trade business and and just a quick clarify there, solicited means that your financial advisor is making the recommendation. Self Directed means all of us as consumers are just logging on to a platform where we're not taking, you know, fiduciary advice, we're basically selecting the assets ourselves. So so there's still a, we believe that there's still significant runway here to continue to educate and build the understanding in terms of where that asset exposure lies in someone's broader asset allocation

Speaker 1  9:42  

has the decision in the wealth business and potentially in the asset management business, has that been client driven, or did you see the opportunity and you wanted to get in front of it? I mean,

Speaker 2  9:53  

you know this from being at Goldman, and you spend your whole life in the space, but you have a lot of people in this. Business, and a lot of clients that are very active within the cryptocurrency space, and they want the same services, right? I will say, I think that's where spending a long time in the in the crypto native space, also outside of my day job, you know, it just didn't deliver on all of the added services that we can offer within the traditional business that's been built over decades and decades and decades. So, you know, as an example, one thing that we're seeing now that's quite interesting, and to your point on, like, where's the client interest? This, this is amazing to me, like, I'm finally, like, coming to reality. Of like, people do student need services, and it's not philosophical like Bitcoin beliefs, but we see spot Bitcoin holders wanting to in kind Bitcoin into a Bitcoin ETP, so we can bring that exposure onto our wealth platform and then offer them other services around that. And so one of the things that we've turned on is margin lending on crypto etps, like, that's pretty awesome. So if you have exposure, like, if it's if you're a large spot Bitcoin holder, maybe think like, Okay, I'll keep some spot. I'll continue to hold spot. But maybe I should use this and get exposure to some other services within the within some of the wealth, that wealth can offer, that I can't get elsewhere. So I think that's been a really interesting evolution. I mean, obviously regulation has a big part of this. And the SEC allowed this to happen, I think, in about September of last year. So you know, this is, these are the things that we continue to see. And I think we believe that the place that we can really position ourselves is this hybrid world, which we think we'll live in for quite a while here. When do

Speaker 1  11:48  

you think the advisor channel picks up and we see a lot more of of you know that type of exposure get into the market? I would say the

Speaker 2  11:56  

100,000 to 70,000 move did not help us, yeah, at least in Bitcoin, you know, I think there's still a ton of education to be done. I think there was so much negativity, even in the previous administration, around like, you know, it's illegal, or you don't want to hold it, or you need to be careful, or it could ruin your business. I mean, just, just so many, I don't want to use the word propaganda, but it's, you know, it's just, it just was not entirely, like, I think, fully educated on some of those topics. So I think what we need to do is just do a better like, have more of a balanced approach on like, how do we talk about cryptocurrency exposure? Where does it fit into your portfolio? You know, what are the risks associated with that? And then make sure that we can also explain, you know, also, I think time helps right. The more history you have, the more data points you have. Hopefully we can, we can use that to our advantage too.

Speaker 1  13:02  

So you said the 100,000 to 70,000 didn't help on the advisor channel, we were just talking a little bit earlier about how maybe that's been good for product development, though, and it's been good for getting your arms around what's happening in this space. Can you talk a little bit about what you would like to see in terms of and how price affects your decisions for building around the space versus, hey, we just, we think this technology is here

Speaker 2  13:24  

to stay. Yeah, we were talking about this earlier, and I was saying, you know, when it when we are in this like momentum, and we're just constantly pushing higher, it's really tough to build in that environment, because the pressure on you to get things to market is super high, and the clients you know have pressure on you, and the financial advisors and institutions have pressure on you. So So having some pullback in that is definitely helpful. I think the other thing that's quite interesting right now is even though crypto, the cryptocurrencies have taken a breather, and we're kind of going through a bit of a consolidation cycle on that side of the business. This tokenization and stable coins, obviously driven by like, you know, genius, kicking that off last year, has just like, created this, like, other momentum in the broader digital asset scope that kind of falls under this umbrella that, like, we don't even have the time, the talent, the like infrastructure to, like, barely deliver on now. So in some ways, it's helpful to have a little bit, a bit of that cooling off so we can, like, really get our arms around everything that's happening here.

Speaker 1  14:32  

What have you we've talked a lot about, you know, the buying of spot, or allowing for people to have access to ETFs. What are you hearing from your corporate clients in terms of their interest in the space, you know, how much inbound Are you getting there right now? And what do you how do you expect that to evolve?

Speaker 2  14:47  

I will say we definitely had more a couple years ago. I would say in the 2122 cycle, there was we were getting phone calls everywhere, like the incoming was just unbelievable. Cool, I will say now it's starting to pick up again, but definitely in different ways. Right? Like, how do I have to think, where's the impact to, like, treasury management, thinking about tokenizing different assets, thinking about, like, where the use cases are, and like collateral use cases. Obviously, that's a topic that's really picked up now. So you're starting to get a bit of a diversified basket of questions, versus like, how do I get exposure to, you know, cryptocurrency and which one should I hold? So it's not just that. It's not just that. I think the other thing too, and I talked about this a couple of weeks ago when I was at strategy, strategy world. I was excited to see more interest and really studying what's happening to holding cryptocurrency on a balance sheet, or treasury management there. And I was thinking like, you know, is it 5% is it 10% how do we manage this over time? And then dats came in, and just like, we just hit that whole like managed treasury management and like holding some like cryptocurrency on your balance sheet just got consumed by the DAT momentum. So I don't know. I still think hopefully, if we we cool off here with the dats, which seems to be happening this year, we can kind of find some, you know, just sanity and understanding if corporates hold Bitcoin on their balance sheet, or Ethereum or other cryptocurrencies that may or may not be related to their business,

Speaker 1  16:34  

makes sense. So let's kind of shift gears a little bit and talk about the banking charter. So you guys made the news. I guess it was a couple of weeks ago about the filing for an OCC Chartered Bank to custody digital assets. Can you talk a little bit about why you needed the bank, what that means for you?

Speaker 2  16:52  

So we are a bank already. We've been a bank since the global financial crisis. I think you know that, reluctantly, yes, you know, it's had benefits to our business, and we've spent a lot of time, like, over what scarily is, almost two decades, making being able to offer, you know, new services to our clients on the banking side, I think, you know, the one thing with OCC charter, and we'll kind of see where regulation goes. Like every week, kind of brings a different flavor of what the future might look like, but the OCC charter would potentially provide us a way to custody and hold cryptocurrency assets for our clients. So we've started down that, that journey already. I think there's, like, really a three step approach there. So we're doing a referral model to start out with. We'll move to legal custody, and then in the future, potentially, you know, really be able to build out that technical custody. I think the other thing too, is longer term, there are some opportunities around the business that we may need to use that OCC charter just to again, it's just, it's too unknown with regulation right now, how things are going to settle out and where we what entity we're able to do certain business off of. So look, it buys us the opportunity to just continue to build out, and we'll, as the information comes through, we'll make those decisions, you know, when we're tasked with them. Does that

Unknown Speaker  18:27  

mean you're going to issue a stable coin?

Speaker 2  18:29  

No. Well, I mean, we that. I shouldn't say that, because somebody will record me, and then when we issue a stable coin five years from now, let's say, you know this, this change. It could always change. But that is that's not on our roadmap at this point. Obviously we need to support stable coins, and that is on our roadmap. Obviously it's the cash lag of of all of the business we do across our entire organization. So the Digital Cash lag. So we will but it's not only stable coins, stable coin tokenized deposits, tokenized money, market funds. All of that is on the table.

Speaker 1  19:07  

It makes sense. We were, I'm going a little off script here, so tell me if you if you want to say no to this, but we were talking a little bit about the in all of these headlines that are coming on, the tokenization of nicey. And you know what you're seeing? Some NASDAQ is working on some, you know, kind of 24/7 market tokenization work as well. And you know, obviously that has a huge effect on your business and your client business. You know what? What are the things that you're seeing out of these headlines, or that one here in these conversations that don't necessarily work? Do you are you a believer that we might see fully tokenized equity markets over especially at least for the weekend leg of that? Like, how are you guys approaching it? So we're

Speaker 2  19:51  

deep in unpacking workflows around tokenized assets. And a couple of things that I would I would just. Say about this, we participated in the secondary offering of figure, which was a tokenized equity offering that we did a few weeks ago. We, you know, the one thing about doing that was it we learned a lot. And when your teams that are just absolute experts in delivering capital markets get into these workflows. I mean, I can tell you they will, like, roll out papers and start walking through, like, where the pain points are. And you really need, we, we all need in the industry, need to continue to do that, to understand how we make this better. Because I do have a very strong belief. And, you know, some people would even ask me, Why didn't you leave the traditional business, you know, you could go just be crypto native outside. You know, for any of you know, the companies in the business, and I did have, like, a very strong belief that ultimately, there's still a lot to do in the traditional finance business, and we need to keep pushing from the inside with people that have understanding at both, both like, what the crypto native technology can deliver, or what that blockchain technology can deliver, and what we can do inside. And that's, I think, what we're trying to do now in terms of the headlines. Look, everybody's putting out their headlines. They're putting their like, you know, stake in the ground that they're part of this movement, you know, as we have, you know, we, I was talking this week about we are actively working to turn on our dark pool, our largest dark pool, our trajectory across ATS, to support tokenized equities by the end of the year. So that's work that we're doing inside. But even as we build that out, we need to continue to see these models work. It's going to be like, this is new velocity, right? If we I mean, it won't be t zero to to start with here, but if we get to t zero, there's lots of things we have to figure out. There's questions around netting. I mean, look, atomic takes away your ability to net, which many times, like having those open orders during the day, do that sell? I mean, all these different terms, like self or like pre funded, or looking at ID markets, especially coming from the emerging market world, Id markets are tough and like, we're starting to, like, go back to ID markets. It's probably not like the ideal model going forward. So, like, how do we really find the model that works and is efficient and doesn't cause like, more? I think we don't even know what the problems are. Right? Like, we're kind of putting we're putting models on the table, and we'll see, like, something will break, and then we get more information, and then we keep going forward. But you know, we have to try to be as smart as we can, to find models that really work and also scale and create that network effect across our entire industry.

Speaker 1  22:56  

All right, one last question for me, and then we got just a couple minutes left, and we'll maybe take a, you know, an audience question or two, but prediction markets, is that something? I was at a bank luncheon yesterday, and the bank was considering at least offering, you know, doing some sort of, like OTC type, you know, structured trade, and then maybe offloading risk onto, like a calcium or a poly market. Is that something that you've talked about with your clients.

Speaker 2  23:22  

So I was, I was at DC blockchain last week, and I said it felt like it should be called DC prediction market Summit, because they've totally hijacked our space. Like, you know, all we talked about is prediction markets, but I think it's relevant for many reasons. And, you know, I think the democratization of having access to what would be, what looks like derivative markets is, is really interesting to be able to offer that. I think it's there. There's definitely some navigation be done there. I'm not the expert on trying to say and I don't want to get into the ethical fights about what we should offer and not offer, but there's definitely something there. I know you're a big investor in this space, so I know you have very strong views on this, but I think it's, I think it's here to stay, and I think we have some, you know, agency support in DC that's going to, you know, at least feels like they're going to help try to be supportive to this, continue to move forward in terms of questions from our clients. You know, there's definitely some institutional clients out there that are asking questions about, you know, how they take or support both the risk that they have expressed in the prediction markets, but also making sure that they can manage all of their other risk in one view, right? Because you're really, you're splitting this into different markets and and different data feeds and everything else. So I think there's, there's clients that are still trying to figure that out as it's, you know, still, still two different worlds at this point.

Speaker 1  24:59  

Do you. Point about the DC hijacking. I do the, you know, kind of DC trip, like, every two months or so, and since, for maybe the last like, two or three times I've been there, I think that's the only thing people want to talk about, maybe a little bit perpetual, perpetual, yeah, but, like, it's literally just those two things today. So all right, we've got like two minutes left, so we're willing to take like one or two audience questions.

Speaker 3  25:21  

Anybody? Amy, could you talk about how Morgan Stanley is thinking about the infrastructure needed to support clients engaging in digital assets if you're looking to build that yourself, or, I know with E trade, you're working with zero hash, but how do you define the line of who you're willing to partner with versus what you want to build internally. You know? I think we're

Speaker 2  25:42  

learning every day on that. I mean, obviously, and it can also be a journey, right? Like there are certain things that we can turn on and use as a vendor now and then continue to evolve over time. And I think across the market, it's very split across, sorry, across our organization, it's very split. So if you look at our institutional securities business, we've built a lot of that tech ourself. It's a lot of proprietary tech. There's vendors around, like, kind of that plug into that, but we maintain a lot of that ourselves. But to do that, it's extremely it's a lot of work for us, and we maintain an incredible tech support to do that. I mean, our tech resources, our cyber security resources, just just like you always talk to product people, the real, I mean, the real people that you want to go talk to is go in house and sit with some of these teams. It's unbelievable, like, really what they deliver on a daily basis. I'm always so impressed. But I think that, you know, I think both are on the table. We'll probably, you know, it's, it's, it's vendor supported. And then there's also things that we'll probably have to build. The one thing I will say is, I feel like there's things we have to build because they don't exist now, and that's more for you to fund going forward. There's like, there is, there is tons of stuff that we're missing, because one of the things we found in the digital asset space is a lot of the companies have built a component, and they're really good at a component, but then when we look at that to bring it on, it's like, Well, where is this service and that service and this service, like, if we're trying to rebuild, and obviously we're not exactly rebuilding the old world, but we need the workflow to be filled in. And so we have had to, already, with some of the projects that we have on the table, build certain control layers and house because, you know, they just, they just don't exist. I think

Speaker 4  27:45  

we got one more back there. Hi there. Amy, I was gonna say, you kind of begrudgingly, said, maybe in five years you do the stable coin thing, but definitely not right now, if you're able to, could

Speaker 5  27:55  

you expand on that? Say five years either? I'd say five years. We're not doing

Speaker 4  27:59  

it, not five years either. But if you're able to, or if you're, if you're open to it, what's like, the biggest factor on why? Why not, or why not, even in five years?

Speaker 2  28:08  

I think, I think it's more of like right now, it's just for our business. It's just not where the priorities lie. I think there's a view that we are not in terms of, like, our payment flow that we operate with, it's a little bit limited. I think it's just just not where we want to spend our time again. We could do work, and in 12 months, maybe we have a different view. But I think with all of the things that are on the table and all the resource constraints and all the bandwidth constraints, I think it's just more of really being driven by priority. And it's just we're doing a lot of stable coin work. It's just that launching our own is definitely not at the top of that stable coin work at this point, awesome.

Speaker 1  28:54  

Amy, if people want to engage with you, learn more about you and what Morgan Stanley is doing, how best can they learn more?

Speaker 2  29:01  

I do answer my own LinkedIn, even though I have people that help me out with that, so I will see your messages there. You can also, you know, definitely tap into me. Anyone you know, Morgan Stanley will find me in house and or you can talk to me after

Speaker 1  29:17  

the show. Thanks, awesome. Let's give Amy a round of applause. Thank you so much.