Trailer Episode

Cryptocurrency's Road to Resilience with Brett Royer of Fidelity Digital Assets

Crypto investors have seen their fair share of sudden market meltdowns this year. This week, all eyes were on FTX, formerly one of the world’s largest cryptocurrency derivative exchange platforms. 

This latest turmoil has sent shockwaves throughout the industry. Yet historically, cryptocurrencies have rebounded following each crisis. What doesn’t wipe out the blockchain becomes a hard lesson for crypto ventures, turning them into fortified iterations of themselves.

For Brett Royer, CFO of Fidelity Digital Assets, the recent unraveling of FTX underscored hard lessons that are not unique to crypto. An expert in high-level financial planning, Brett says those lessons point to fundamental business principles that have long existed.

In this episode of The Modern CFO, Brett talks with host Andrew Seski about decentralized finance, the role of trust within the increasingly digital world of finance, how he thinks about risk, and more.

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Please note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.

[00:00:00] Andrew Seski: Hello everyone and welcome back to The Modern CFO Podcast. As always, I'm your host, Andrew Seski. I'm thrilled for the episode today because we are joined by Brett Royer, who's head of finance at Fidelity Digital Assets. Brett, thank you so much for being here today.

[00:00:19] Brett Royer: Andrew, thank you for having me.

[00:00:21] Andrew Seski: So, we're going to dive right in. The world of crypto and the world of digital assets has evolved in a unique way, down to literally the hour, especially this week. So, I want to kick off not just on the current event side, but we're going to have plenty of time to go through those current events, I want to start today actually with your career and then kind of the history of Fidelity Digital Assets, which I know spans back farther than most institutional groups had even considered labs themselves. So, we'd love to kick off with maybe some of your educational background, sort of the rise to this position, and then we'll segue in and out of how Fidelity Digital Assets is positioned today and what you're thinking about today. So, we have a lot to cover.

[00:01:08] Brett Royer: Yeah, sure. Great. So, I'll start with a little bit of career history. Prior to business school, I'd say one of my more substantial roles was working in the Merrill Lynch Private Banking and Investment Group. So, there I was working with a former Chicago Board of Trade trader who had sold a business, a trading business, for a substantial sum, thought he was going to retire and ride off into the sunset. I spent some time doing some personal things and then realized that he got bored. And so, went back into business as a wealth manager and he ran his own proprietary trading strategy for a lot of the clients that he served. And so, I joined his team as sort of a mini fund analyst of sorts that supported the portfolio analysis and trading decisions behind the proprietary strategy that he used on behalf of his clients. And so, that was a really great experience. I think there, I kind of developed my first set of background and skills in capital markets, gained a pretty good understanding of how the markets work, traded in some illiquid securities and got a sense for what that was like. And had a pretty interest, I was there at a relatively interesting time.

[00:02:33] So, I was probably in my second or third year, I can't remember exactly which, when things started to go wrong in Wall Street in financial services, right? So, the history is Lehman goes bankrupt and then Bear Stearns comes about as close as you can get to bankruptcy. And then I remember distinctly going into the weekend, Merrill Lynch was next up as a potential firm that was looking at having liquidity challenges and potentially could go under. And I'm sitting there as a junior analyst and just sort of watching this from an interested perspective, but also from perspective of like, my job was on the line. But at that point in time, I didn't have as much to lose. Obviously pretty early in my career. But nonetheless, I think it was a strenuous time for everybody. And I distinctly remember sort of being glued to the TV all weekend just waiting to see what would happen. And then sure enough, Bank of America, acquires Merrill Lynch on Sunday and I was really lucky to have a team that supported me, and I was able to maintain my role throughout then. But learned a lot of hard lessons around what bear markets feel like and look like. And I think that's in part educated some of what I've seen and felt in crypto markets as well. And I think just giving me a little bit of perspective on not getting too lost in the moment, either up or down, right, and having an understanding that these things tend to be cyclical, right? And there are going to be ups and downs and you don't want to get too over indexed on either side of the equation while you're in the moment, which is really hard.

[00:04:08] But from there, I decided I didn't want to be a financial advisor. I think that would've been the next move if I stayed there. And that group worked with $10 billion clients and above. And so particularly difficult prospecting or particularly difficult segment to prospect in a serious way if you're a 25-year-old. So decided anyway that I wanted to be on more of an analytical track and more of a CFO track anyway, so made sense to go back to business school and sort of pivot. And so, I went to the University of North Carolina, got my MBA there. And around that time, Fidelity had just started recruiting at the University of North Carolina for a financial leadership rotational program. And I'm from Massachusetts originally, so familiar with Fidelity. Really wanted the chance to get back to the Northeast and so jumped at the opportunity to join a program that is tagging itself as developing the next future CFOs of Fidelity business units.

[00:05:05] So did that. And the idea is you get broad exposure to the firm in relatively short order, right? You do six-month rotations in four different parts of the firm. And then you graduate, and you come out and Fidelity really has a sort of continuous career rotational program aspect to it, even after you're out of that traditional rotational program as well. So after I graduated, I spent the majority of my time, five years or so, in a role in our Fidelity institutional business. So, it's a really interesting business for Fidelity. They provide custody for registered investment advisors and then clearing for correspondent broker-dealers as well. And I worked on the broker-dealer side of the business. And up until 2008 or so, Fidelity was the clearing provider for a couple of large firms, JPMorgan and Bank of America. And around that time, they lost both in a year as a result of JP Morgan buying Bear Stearns and then Merrill, Bank of America buying Merrill Lynch. And so, both had self-clearing capabilities that sort of made them take away the need for a clearing provider like Fidelity. So, I don't know what percentage of the business those two represented. But needless to say, they were pretty considerable at that point in time. And I think there were a lot of hard discussions around whether the business could even survive. But kudos to the leadership at the time. They continued to invest in that business and grew it back even larger than it was prior to having those two big clearing firms.

[00:06:45] And so I had an interesting experience there. Went through an acquisition of a smaller clearing firm. So, JP Morgan Clearing exited the business and we sort of did a non-typical acquisition, which was a purchase of the client book versus the purchase of the actual business itself. And then went through the process of trying to renegotiate those deals anyway and how that impacts sort of the valuation of that deal was challenging and unique. So really great experience there. And then also experiencing sort of waves of regulation. Around the time that I was in that group, we had DOL was coming in with a new set of rules that were really going to force a convergence of sort of the advisory model and bring together sort of the broker-dealer and RIA models under something that looked more like across the board fiduciary standard. And that was just a massive change for anybody who was running a broker-dealer business at the time. So a ton of strategic discussions and preparations for what the impact of that could be. And then, sure enough, we changed administrations and all that goes away anyway. So this is the nature of different administrations is you've got ebbs and flows in terms of regulatory tightness and ethos around what's important. And you got to adjust to those over time and find ways to still meet client demands.

[00:08:15] Andrew Seski: Just a quick comment before we continue on to your segmentation and move into the Digital Assets arm. And another, there's some really interesting projects that were incubated there, too. But before we hop in there, do you think that there was an aspect of your personal risk aversion or how you think about risk? With your first foray into the world of finance being the global recession, not just the global recession but one that had a lot of dominoes stacked that people are still studying today. The over securitization, how we think about collateral, how you think about personal risk. You think that guided some of your career? I know that you moved kind of away from being a financial advisor just because it's a challenging role to go, like you mentioned, go prospect those types of potential clients as a 25-year-old. So, I mean, it sounds like that was a big piece of it. But how do you think that that shaped how you thought about your career and risk in the world of finance?

[00:09:17] Brett Royer: Yeah, I mean, it certainly had a big impact looking back, right? I think what brought down some of those large financial services institutions were risk management practices that were not fully up to par or sort of interconnectedness of exposure across the financial ecosystem that wasn't fully understood. And I think there are a lot of corollaries to be drawn to some of the things that have happened in the crypto market now, right? I think there are lessons that traditional capital markets and financial services have learned the hard way over time. Not to say that it's ever fully solved, right, even though the broker-dealer and capital markets business have been around for a long time, but we were still learning hard lessons all the way through 2008, right?

[00:10:08] But I think the interesting thing from the perspective of the crypto ecosystem is just the acceleration of that learning curve of the hard lessons that have been learned, right? I think there's a lot of similar stories that you could draw parallels to that have happened in the past and financial services around under collateralized loans and contagion effect from exposure cascading across multiple counterparties and people not really understanding the true risk profile of the firms that they're interacting with. I think those are all things that are not unique to crypto. I think they're fundamental business principles that have existed and caused problems for financial services for a long time. I just think that what we've seen unfold is just a really accelerated learning curve again for crypto, which has been hard because it's happened all at once and it's been painful. And that's how these things tend to work. But I would hope that in the backside, right, that we get some better business practices. Perhaps we get some more comprehensive regulation that looks at this in a thoughtful way from a consumer protection perspective but also from the perspective of not stifling innovation and not putting the US in a position where we're behind other countries in terms of having the ability to use crypto in ways that can benefit consumers over time. So that's the balance.

[00:11:42] But I think one of the things that strikes me as pretty clear from this, there have been lots of folks in the crypto industry who I think are hesitant to have any sort of regulation come into play. And I think the thought is we can figure it out on our own or these things can be handled via the blockchain or there's lots of different thoughts on how or why regulation is bad or good. My perspective is that I think unfortunately what we've seen play out is that when you combine sort of relatively nascent ecosystem and business models with greed, that it tends to err on a path where you get these problems where there's a mismatch in sort of risk reward philosophies. And then in some cases, that risk has been passed along to consumers who are just unknowing of the type of risk that they're taking on for a given situation, right? And so, you look at all that and you say that's where regulation is good. Because I think everybody in the ecosystem would agree that we don't want to put consumers at risk of holding the bag on some of these scenarios where things go wrong. And so, I think that's where you look, and you say that regulation has been pretty good over time of finding ways to ensure consumer protection.

[00:13:02] Andrew Seski: It's a little tricky. I mean, I feel like the SEC actually gets kind of a bad rap, but they can't really regulate proactively so they have to then retroactively. And you're seeing a lot of this, DOJ, too. I mean, there's tons of money flowing into the government to start going back through some of these issues that have been kind of plaguing this system for a while. But it's not that well received either because of the sort of libertarian tint that a lot of this started in. If you go all the way back to reading the Bitcoin Whitepaper, you can realize that decentralized finance was that first iteration using the tech. And then, yeah, it's just interesting to think about, especially going back through time and how these different winters have sort of formed the next waves of all the projects and all the exchanges that have come out and kind of what those goals are.

[00:13:57] I think Adam Draper, Tim Draper's son, put out kind of an interesting article where he said he had met Brian Armstrong from Coinbase and had discussed kind of what one global financial infrastructure would look like and that it would probably be built in these next few iterations. But in that article he put out or just blog, he also listed a couple of events that, not sure if you remember each of them, but in 11 Silk Road crashes, 13 Mt. Gox, 17 was the big ICO bubble, and I think we could probably cement FTX as a major crash that may drive another winter or at least some really maybe necessary introspection for maybe some of the venture dollars flowing into the projects just in terms of diligence. You could probably say that across a lot of the sectors, to be honest. But I think it's not just a result of the ecosystem but also in the financing of the ecosystem.

[00:15:00] So those incentives are really important to remember because as purely sort of this libertarian sort of idealistic thing was promulgated, now all of a sudden, we've got a lot of mixed incentives going through how scaling the ecosystem's going to look. And maybe that's a natural segue into how you got interested in and how Fidelity Digital Assets started because that was back in 14, which I think was probably one of the earliest at least in kind of the institutional world. So would love to hear the history of that.

[00:15:37] Brett Royer: Yeah, sure. Yeah. Fidelity's got a pretty good history here. Some of the initial blockchain research started in 2014 in our Fidelity Center for Applied Technology. And then soon after that, we launched that into a fully-fledged blockchain incubator in that group. And they were tasked with developing blockchain capabilities that Fidelity could use for future products and services. 2015, we started accepting donations in Bitcoin to our Fidelity Charitable unit. And then in 2018, Fidelity Digital Assets, which is the business that I'm a part of now, was born to offer custody and trading solutions for Bitcoin. And the thinking was really twofold at that point in time. One is we had done a lot of experimentation in some of those applied technology groups. And you can learn a ton from experimentation, but you really can accelerate your understanding of what will and will not work for customers when you are in the market trying to sell your service. Launching a business around these capabilities that we developed in-house really made sense. And then two, we believed that the institutional marketplace was really underserved by existing crypto providers at that point in time, right? Fidelity's got a really long history of providing services to institutions of all kind. We know the market well. We serve something like 4,000 institutions today through various. We understand what they demand on the traditional finance side of the house. And so, we believed we were in really good position to build a crypto platform that met the high standards of institutional rigor that those types of traditional financial services institutions would have.

[00:17:26] Andrew Seski: Does Fidelity manage custody as well? I mean, I think that's probably one of the biggest issues across space still that kind of, I mean, maybe it gets talked about, maybe it doesn't. But yeah, I feel like custody solutions are one of the key aspects of being really successful as a provider in this space right now still.

[00:17:44] Brett Royer: Yeah, it's a good lead-in because we really believe that everything starts with custody. So we really, we started the foundation of the entire set of capabilities that we developed in crypto, starting with ultra-high security custody. And what we utilize offline voltage storage for the cryptographic key material and then add our own sort of special Fidelity additional layers of securities and controls that you'd expect from an institution that provides custody for $10 trillion in customer assets across the enterprise. And then from there, we built some of our other capabilities, right? So started with custody, but then we said it makes a lot of sense to layer on a trading capability that settles directly to that cold storage custody solution. And so, we developed our own multivenue, smart order routing trade platform that again automatically connects and settles to that custody solution. And then, we wrapped it all up with a white-glove service model, with trading and transfers available 20/7 and service availability 24/7 to provide really that high touch that institutions expect. And then on top of that we try to seek all the assurances we can from both a regulatory standpoint and a control standpoint. So we went out and we received Limited Purpose Trust Company Charter from New York, which is really essentially the highest standard for a crypto service provider that we have in the US.

[00:19:24] Andrew Seski: I can only think of one other. And if people are really conscious, they'll go back through the podcast and realize that was the only other person or only other representative of a group who can call themselves a trust company and some of these white-labeled solutions. So we'll see how savvy some of our listeners are if they can figure out that there's only, I think there may only be one other trust company, technically. But yeah, I love the fact that Fidelity's taken all of the actual steps to, I mean, that doesn't sound like there's a single beat missed from starting.

[00:19:56] And I also love at some point in the conversation, we don't have to spend too long on it, but the role of trust I think is really an interesting one because I think in the institutional-grade solutions that we're talking about, no one's going to manage their own private keys. No one's going to do their cold storage. Yet it's a little bit, I don't think it detracts at all personally from the environment, but to rely on a major institution as an intermediary while discussing blockchain, smart contracts, all of this intermediating technology, it's interesting that we in this time and age are still dealing with trust issues and security issues. And a lot of it's still complex. Personally, I don't think it again detracts from the ecosystem, especially in the institutional side, to have these solutions. I actually think it's generally positive for the time being. 'Cause like you said, the early iterations of the Digital Assets arm was, we got to be able to feel it, understand it, to be able to grow it, to be able to iterate on top of it, to be able to build new products to service the environment. But kind of curious as to how you feel about all of that. And again, we probably should step back into how you got interested in the space. And you've been with the Digital Assets group for a long time now, too, right?

[00:21:19] Brett Royer: Yeah, since 2019 I've been with the group. So I'll start there and then I'll go to the sort of philosophy and some of the things you talked about in terms of self-custody. Yeah. So I guess I got interested in a similar way to a lot of others. On the personal side, sort of exploration of trading and starting to mess around with some crypto assets in my personal account, I had the benefit of, at the time that I was happening to look for the next role, we had sort of just spun up this Fidelity Digital Assets unit, and I got to see Tom Jessop, who currently is the head of the unit, present out on some of the thoughts in the direction that we wanted to go with it. And at that point in time, they had a part-time CFO who was supporting the unit like as 25% of their role. The unit was only 70 people at that point in time, but it was at the point where I think there was a recognition that it was going to be an area of growth and needed the full-time attention of a full-time CFO. So things sort of lined up well in that way. I expressed interest both from a crypto standpoint as well as stepping into this role, I had to be willing to sign up for being an army of one for some period of time. And that I think that's probably familiar and true for a lot of startup CFOs. But I guess a little bit unique from the perspective of working in a really large company like Fidelity going from managing a decent size group to wanting to take on this role and needing to sign up for the idea that I was going to be an army of one for a while and that was going to be a very different sort of set of responsibilities. But in my mind why it was really attractive to me and it has played out fantastically for my career development, just staying engaged and interested in what I do every day is the breadth that you're able to get from stepping into that role is again sort of a growth business CFO within a much broader organization, right? That manifested itself in a couple of ways. I think one, probably a lot of your CFOs don't even think twice about this because it's the standard way you operate if you're a standalone business unit.

[00:23:33] But coming into Fidelity, a lot of business unit finance folks don't spend a lot of time at the legal entity financial level, right? So thinking about a big corporation, you don't need to set up a new legal entity every time you set up a new product line or business unit, right? So a lot of times there's just a disaggregation of how you think about finance within your unit versus how things are done at the legal entity level. But what this role presented me an opportunity to do was to care about both because crypto's unique in its regulatory structuring, so we needed to set up a separate legal entity to be the service provider for crypto services to our institutional customers. And so, we did set up that separate legal entity and then in fact, over time, grew that into two legal entities. So we now have a legal entity in the US and we've got a UK-based legal entity that services non-US customers. And so, from a career development standpoint, right, that was important to me to be able to have that sort of full end-to-end ownership of the finance function, which included caring about audits and signing off on the financial statements, caring about balance sheet and capitalization, caring about regulatory capital and how you handle planning for what can be a pretty volatile environment in terms of customer interactions that impact your regulatory capital on a day-to-day basis.

[00:24:56] So all that was really interesting and exciting to me when I looked at the opportunity. And it's played out really well. So I appreciate all the experiences that I've been able to get. And that's the risk that I was taking up front, banking on the idea that I'd get that broad exposure starting off with an army of one. Obviously, now the business has progressed. We're gonna be north of 500 people at the end of the year. So it's been a great evolution.

[00:25:25] Andrew Seski: So and the idea, it's interesting, I was actually, when I was asking the question around trust, I was actually rereading a quote from Abigail Johnson talking about kind of the earlier stages of her kind of obsession with trying to figure out the full tech stack, which I thought was really, really cool. And kind of her first, one of her comments was starting with custody solutions seemed to tie antithetical to the technology, which I thought was a great comment on, I just love the approach. She basically came out to say Fidelity's had this long, privately owned success for generations due to in part contrarian thinking. And when people are running for the door, being able to have the wherewithal, the confidence, and the kind of long-term approach to nascent technologies and industries to be able to double down and really learn and feel all of that. So that's kind of where that trust question was coming from.

[00:26:24] So I mean, it's nice to have somebody who's kind of leading the charge with so much thoughtful consideration in the space and where it makes sense for Fidelity to provide support versus how to push the industry forward and kind of just a nice patient approach. Especially as you said in terms of kind of the volatility of the space where all of these winters and kind of crashes are happening at so much faster of a clip. It takes a ton of patience and a ton of maturity to go through the volatility and be able to express what your priorities are maybe in a time where there's a lot of value loss at the time. So yeah, that's kind of where that was stemming from. But I do think it's super interesting that the group has continued to expand so rapidly. I think there was a comment in that article, too, that one of the first offerings was just Bitcoin and 401ks. Is that right? Does that sound? Yeah. I'm not sure how long ago that was, but I think that probably spurred a ton of interest, too.

[00:27:29] Brett Royer: Yeah. Yeah, that's recent. So yeah, definitely a little bit of a response to sort of marketplace demand there. I think that the 401K unit just continued to hear a lot of interest from planned sponsors and having a product that could gain their participants' exposure to digital assets. And so, this was really in response to that and we think a relatively innovative product that gives those who are seeking a way to allocate a certain proportion of their retirement assets to digital assets. So yeah, certainly, that was a great example of a way that we think about the capabilities that are being developed within my Fidelity Digital Assets unit, potentially being used in other ways over time, right?

[00:28:25] So I think from a long-term philosophy perspective, we started this unit and wanted to build the core set of capabilities. We went direct to the institutional market. But I think part of the vision always entailed the idea that over time, we expect the digital assets will begin to look and feel like any other asset class to investors. And so, we wanted to build those set of capabilities and then when the time is right and when the demand is there and when the regulatory environment is right we fully expect that we'll be able to provide digital asset services to an increasing number of customers that we touch again in the fullness of time.

[00:29:08] Andrew Seski: Sweet. Well, I'd love to take a quick step back and run through a few of the questions that I really like to indulge in most of the podcast for continuity's sake. But would love to hear your perspective on just a personal definition on what you'd consider a modern CFO today. Maybe some of the characteristics that embody a modern CFO or maybe some things that modern CFOs should have on their radar that they don't today. Maybe we just start there.

[00:29:39] Brett Royer: Yeah. When I think about the CFO role now, I think about the CFO role really broadening in the context of the organization, right? So I always like to aim to be viewed as a business person first who happens to know a lot about the finance of the business versus a finance person who happens to know a little bit about how the business is run. And what I mean by that is it's not okay for the modern CFO to be a passive observer to business activities and just report out on how things are going or how they went, right? The days of business leaders making decisions on gut and experience are largely gone, right? Virtually every company in the world now has a data-driven decision-making mindset. And so, the modern CFO really needs to be deeply engaged in the decision-making activities of the business, both in traditional finance terms, so P&L, NPV, IRR, return on capital, but also the nontraditional finance terms, right? They need to understand both financial and non-financial data. They need to understand how those interplay between each other and then how all of your data can be used to derive insights and make better decisions.

[00:30:51] And then lastly, I guess one of the things I think a lot about is how I think the CFO role probably needs to be more willing to step outside of the traditional CFO swim lane when necessary to help the business in new and unique ways. So at my very first job out of undergrad, they taught all the incoming analysts that you are literally not allowed to say "That's not my job." Like that's a phrase you are not allowed to say. So I've carried that kind of philosophy with me throughout the rest of my career, right? And I think some of the most meaningful experiences that I've had were not handed to me in a job description or given to me by a manager. But they were formed by me raising my hand or asking a question or, in some case, just starting to do something in an area where there was a gap or an opportunity that wasn't being addressed. And I found that there are very few managers who will take issue with someone taking the initiative to just go ahead and solve a problem without asking, as long as it's not too far outside of the realm of your role. So that's another piece of the mindset that I think is important is willingness to sort of adapt and evolve around the edges some of the things that the CFO can be involved in and help the business improve upon.

[00:32:06] Andrew Seski: I really appreciate that. And I typically ask people to hit that back 30-second button a few times when I hear really great advice. And I think anybody who's aspiring to the CFO role or is in their first time CFO role should really consider that advice and take it to heart. I think that was really well articulated. I appreciate that, Brett. I want to talk a little bit about 2023, the next 12 months. What's on the horizon for you and for the Digital Assets group? What's top of mind? What are you most focused on trying to build right now?

[00:32:39] Brett Royer: Yeah. So certainly in general, focused on new opportunities to serve the rest of the Fidelity enterprise in terms of crypto capabilities where appropriate. From a finance team perspective, one of the things I've been spending a fair amount of time on is actually preparing for crypto tax regulations. So maybe a little bit esoteric in nature but I think this is an area where crypto is going to catch up to traditional financial services and there's obviously already been some indications of some rules to come. But this is sort of one of those areas where I talk about having the opportunity to raise your hand and take on some new responsibility sets. So as we anticipated that there was going to be some new requirements around crypto tax reporting in the not too distant future we started to work on what that would look like. And I've actually started to build out a team that's going to help us in Fidelity Digital Assets, prepare for any requirements which are going to be defined and we expect that this'll look a little bit more like a traditional set of brokerage reporting requirements, right? So I think in the future, you should expect to get something that looks like a 1099, multiple different kinds of 1099s from your crypto services provider. And that's a big initiative for the government and the IRS is I think starting to bring some of these things back under the existing frameworks and umbrellas where they make sense. And certainly the expectation is that crypto is not a tax-free realm. And so, this is just going to be one step in the direction of bringing crypto up to par with the rest of financial services. And that's an area where I think we'll spend a lot of time and focus on getting ready for that over the next 12 months.

[00:34:23] Andrew Seski: Yeah. And for those listeners who don't know, the IRS received an $80 billion budget over the course of last summer. So this is not an "if" but "when." So I think Brett makes a really good point just to highlight the fact that this taxable ecosystem it's already here. So having the foresight and wherewithal to understand that the IRS is going to be pretty active in the crypto space I think is just good practice. And we've seen these iterations through the idea, and we're still going through this. I think that there's, we're going to see what happens with how securities law interacts with the crypto space. And there are some ongoing conversations with the SEC. And it's just, I think it's just part of the space and how early we, it's just good representation of how early we are still. So I think it's smart to have a good sense of the regulatory environment, but then also likely seek out counsel where appropriate to ensure that you're maintaining compliance because the worst part of some of these crashes is that they're riddled with some of the greed that we talked about earlier. And there are some consumers who aren't well protected against some close to two or considered fraud or financial crime, which really sets back the interest in the space and the participants. So wanna do the best we can to have thoughtful conversations and have thoughtful regulations around all of this. So I think that's a great initiative for the year to come. I think it'll continue to drive the space forward, so I really appreciate that.

[00:35:54] I'd love to drive into one of my favorite parts of the podcast and talk about one of the things that you feel may be underestimated in the world today, and if there's anyone currently addressing that that topic or space. But love to drive into this 'cause it's always really interesting given the unique vantage points of the people we talk to on this show.

[00:36:14] Brett Royer: Yeah. I'll give you a quick hit. I don't have the background to fully understand all the implications of this. But one thing that I look out at now, especially in a post-pandemic world and how globalization of the workforce and the virtual environment, it will sort of impact staffing and how we build out teams. I think about what globalization has already done for an economy like the Indian workforce, right? And you think, you look forward and you say, do you see things like that continuing to evolve and emerge? Can you imagine what that looks like for the Chinese workforce over time, right?

[00:36:52] I think there's already been pockets of the ecosystem where there have been movements and certainly traditional product manufacturing and those types of roles. But even if you look at the service economy over time, right, you think about the amount of people that could be utilized and globalized in terms of the workforce for any company in the world now. One, I think it really just expands your access to talent and it can go anywhere. And then two, I think it really potentially changes the opportunity set for people in some emerging market countries, right, where normally, prior to the world sort of going in this totally virtualized environment, I think people's opportunity set for work was more limited to the localized opportunities. And I think one of the things we're going to continue to see emerge is that just that globalization of opportunity set. And I think that can have really, really massive implications for what teams look like in the future and what workforces look like in the future, right? Even thinking back to pre-pandemic, I think Fidelity has had a large set of teams in India and other parts of the world. And I think there was a little bit more of a mindset of like passing things along over time zones, right, and not having that true end-to-end connection. But now, you look at the way that teams work. And there's no concept of passing off. It's sort of a continuous like evolution and discussion of teams that work across the globe together on the same things at the same time with a connected mindset. And I think that's gonna be just a massive change that will continue to evolve over time. I see huge opportunities for certain parts of the world to start to really step in and have more of their workforce contribute to sort of that globalized service economy.

[00:38:44] Andrew Seski: Yeah, absolutely. A bold case on productivity and innovation for sure. Do you see that happening at all internally with your groups or is the Digital Asset group global and partially remote? Have you had to deal with that as an army of one to 500?

[00:38:59] Brett Royer: Yeah, definitely. I mean, the good news is that our unit was sort of al already global, even pre-pandemic. The nature of crypto is that the expectation was over time that we were going to get closer and closer to sort of 24/7 availability because the crypto market doesn't sleep, right? And in order to do that successfully, you need to have a geographically distributed workforce. And so, we had already made a lot of efforts to do that even pre-pandemic and. So I guess in some ways, we were somewhat uniquely prepared for this sort of scenario because if you're used to working in virtual teams anyway before you're required to, it's just sort of more of the same. It's just an extra dose of it. So yeah, I'd say we were somewhat uniquely prepared for this evolution. But I think even still, it's going to continue to evolve over time and we're going to see more and more of it, even where I think still predominantly US-based but I think you could see that change in the next 10, 15 years where teams could look a lot more like the distribution of the population of the world over time.

[00:40:11] Andrew Seski: Yeah, that's great. That's a really interesting comment. I really appreciate you sharing that perspective. I was thinking, this is kind of a random thought here, but as I was preparing for our conversation today, I went through a bunch of the kind of my go-to resources for preparing for interviews and thinking about crypto and thinking about the global marketplace, and I stumbled across a really great interview with David Rubenstein and Abigail Johnson that I highly recommend people check out if they're interested in Fidelity's history in general. And it just made me think to ask in a world with so much information, and we were chatting about FTX prior and the world of Twitter being where a lot of people are getting information from, I was just kind of curious. I know Fidelity puts out really high-quality research and reports and there's a lot of marketing and media that goes into trying to educate participants. But I was kind of curious as to where you go or if you've read anything maybe even outside of financial news or crypto news. Just how you're receiving your information and if you're reading anything or listening to any podcast that listeners would value from.

[00:41:19] Brett Royer: Yeah, it's funny. I don't have a whole lot to add. I use all the same sources I think that you mentioned. I think there's a lot of great resources and people who are willing to give away their opinions for free on crypto Twitter. At the same time, I like to stay away from that to stay in the echo chamber sometimes because I do think that it's always good to have perspective. And I think if you go too deep down the rabbit hole sometimes and you're really embedded in some of those echo chambers, you lose sight of what's sort of going on in the broader world around you in financial services. And so, I always try to take, I love learning new things about crypto and I love going deep and understanding things at a pretty fundamental level. But at the same time, I want to make sure that I'm balanced enough to not get too focused on crypto as the end-all be-all and always bring it back. I'm sort of pragmatic in how I think about how crypto services can be used for our customers over time. And I tend to take the approach of, I think these things are going to happen more, a little bit more gradually and we're going to find better and better use cases for customers to interact with digital assets versus the extreme perspective that crypto's going to eat the world and be the only thing that's left from a finance perspective so.

[00:42:43] Andrew Seski: I think that's probably a pretty nuanced and balanced approach to learning. I think anyone who oversimplifies is sort of missing it still. It's still a pretty complicated scenario with, again, as I mentioned, a lot of kind of new and emerging incentive structures as to how products are being built.

[00:43:01] So I did want to take this opportunity also to give you a chance, and it sounds like the team is probably still expanding. Would love for you to share how people can learn more about Fidelity Digital Assets or maybe even get in contact with your team to learn more, maybe check out some of the Fidelity careers and just make sure that people have an opportunity to continue to see Fidelity Digital Assets as one of the market leaders having been in the space for a good amount of time here.

[00:43:30] Brett Royer: Yeah, absolutely. Our human resources and talent acquisition teams have done a terrific job. I can provide you separately with a link. But I think we now have within our sort of Fidelity jobs portal, there's the ability to click in and see the roles that are dedicated to Digital Assets within Fidelity because it's been such an area of growth for us. We really wanted to focus on reaching out to those people who are interested in it, not only from the perspective of those who are experienced or have crypto experience from prior roles but also those who are interested in learning and want to sort of come in and take the opportunity to have a place like Fidelity to take their first shot at crypto. So yeah, happy to share that. It's definitely been a huge area of focus for us in what's been a competitive talent environment. We've seen some backing off and some other firms have some challenges from the personnel perspective. But I think it's still an environment where it is a challenge and it's something that we focused a lot on to get the right talent with the right mindset to combine sort of that crypto curiosity with some of the Fidelity philosophies that we think are still really important in any of our businesses, even on the crypto side, which is customer-first mindset, customer obsession, doing things the right way.

[00:44:57] Andrew Seski: Well, in my opinion, that's a very organic and really, really high value marriage of Fidelity values and a nascent emerging technology like the blockchain space. Brett, I hate the fact that we have to start wrapping up, but I wanted to say thank you so much for being on The Modern CFO today. I really hope we have the opportunity to stay in touch as your group continues to grow. And just wanted to just say thank you one more time so.

[00:45:24] Brett Royer: Appreciate it, Andrew. Nice to talk to you as well.

[00:45:26] Andrew Seski: Thanks

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