Fidelity CEO Abigail Johnson on Stablecoins, Bitcoin, and Innovation Bets

Transcript

Crypto did kind of arouse some very primal feelings amongst a lot of people. Well, it really started as a learning curiosity thing. They mostly didn't understand it. We just started hearing about this Bitcoin stuff and we're like, "Wow, what what is this? It could really someday lead to radical changes in our business. Okay, good morning everyone. Uh, I'm very excited to be here with Abby Johnson, CEO of Fidelity. Welcome Abby.

We are so excited to have you here. >> I've been hearing from so many folks in this room how excited they are to hear from you. So, we're excited the moment is here. >> Um, so let's jump right into it. So, as you know, Abby, I have a background in traditional finance. I came from the New York Stock Exchange when I joined A6Z crypto and I know how hard it was back in the day to try to get a big institution, financial institution into crypto, but you did it early at Fidelity almost a decade ago. You got Fidelity into crypto. Tell us why you did it and how you did it.

>> Yeah. Well, it really started as kind of a learning curiosity thing. I mean, one of the things we try to do at Fidelity is really build uh, you know, a learning and a curiosity kind of oriented culture. So, me and a bunch of people like we just started hearing about this Bitcoin stuff and we're like, "Wow, what what is this and how does it work?" And none of us really could answer the question very clearly. So we just started these regular conversations where let's try to understand this and see you know of course back then when it first few years of it coming out [clears throat] and this would have been kind of around 2013ish very early days

>> when we 123 when we were really just talking about it and saying like is this even real because if it's if it's real we want to know and if it's not then you know move on to something else. Anyway, pretty quickly, uh, a group of very senior people, me, business, a couple business people, and probably a bunch of people from our tech teams, we looked at this and we looked at it, we thought, "This looks real. I mean, this is something going on here, and we're going to um we're going to start brainstorming about where it might go because it could really someday lead to radical changes in our business. And wouldn't that be interesting exciting?" And we started brainstorming on use cases and we came

up with a list of 52 use cases that we thought would be potentially exciting and we sent them out around the organization. We sent people out to go uh investigate them and see if any of them would work. Anyway, turns out one of them worked and it was actually the simplest one and it was actually the thing that kind of I think put us on the map uh in those early days and somebody had suggested that since there was a lot of new wealth that was being created by Bitcoin that there were a lot of people who wanted to use that newly found

wealth to make charitable deductions and to make charitable contributions and we have this thing called the charitable gift fund which is a donor advised fund. So we arranged to be able to accept donations in Bitcoin. So you know to me at the time I thought this was a massive disappointment. Not because it was a bad thing. It was actually accepted and welcomed by the marketplace. But the actual business, all we did was take people's crypto into our donor advised fund and sell it and make it easy to for them to be able to give it away.

>> I'm sure no one else would have accepted it back in 201. >> Well, yeah, that that was that was the big that was the big issue is that just nobody else wanted to do it, right? And I felt like this isn't very exciting, but we did I think it did get us frankly credibility in the ecosystem of of crypto and we met a lot of people and at the same time we were kicking off our own mining operations and I felt very strongly that if we were going to do this we were going to do it in a um from the ground up kind of a way and That meant being active in in mining and you know we ran the numbers like everybody

else and mining was actually a pretty attractive business. It turned out to un it turned out to be you know probably the highest single highest RR business that we've had. Wow. >> Um well you know we if you started mining crypto in 2013 you you know did okay. Yeah. [laughter] So, but it took a long time for that to be appreciated. Uh, in fact, people tried to shoot down my initial proposal that we invest $200,000 to buy some of those early ant miners and um >> paid off.

>> Yeah. Anyway, that that was that was the start of it. So, >> great. And then what was the evolution from there? How did you get into um enabling customers to trade Bitcoin and ETH, etc.? Well, so we continued with those use cases uh most of which have never materialized, but that's okay. They were ideas. They were ways for us to explore and learn. And we didn't I mean the way I thought things would go has turned out to be so totally different. And in fact, the first real business customer-f facing business that we launched was our custody business.

And if you think about the nature of the custody business, I mean custody is it's kind of like the world's oldest one of the world's world's oldest business. You know, you're taking somebody else's assets >> and holding it for them. And that I that initially that struck me as so >> anti- crypto. [laughter] I mean, it kind of went against the grain of what I thought it was all about. But then we um we had a lot of demand for custody services from independent advisors, many of whom had people in the crypto business as their clients. And people who were holders, early holders of crypto were interested,

I assume, in doing things that lots of people do around planning for uh your s uh survivors to be able to um uh be able to enjoy your assets when you're gone. And you you have to have a custodian to do that. So, so we got into the custody business and that really got that that was very foundational and I came to appreciate it. One of my crypto colleagues uh started talking about how Fidelity was really uniquely positioned to be a bridge player. So somebody who uh an organization that would transcend

uh tradi and defi and custody was going to be an important part about that. So it took me a little while but I came to appreciate that point of view and we went into the custody business and lots of independent adviserss wanted to come to us as an increasing number of their clients were coming to them with their Bitcoin and saying you know I need help holding this and planning for the future of of this asset in the context of my total uh estate. So that that really got us in um and going in terms of serving customers. It uh put a lot of pressure

on us to build security and as a traditional financial services player we are all over cyber security uh traditional security um you know holding other people's money is the the core at the core of what we do. It's um so something we I think was a really good challenge for the organization and we built a very um deliberate uh clear and robust security system around our custody offering and I think again that helped us to continue to build credibility in uh in the

ecosystem and it's gone on from there. So we now have crypto embedded in multiple parts of the organization. I think that was really key towards being able to cultivate ideas. We have ideas that come from different perspectives. Our custody business. It now thanks to the Genius Act sits alongside our traditional brokerage business. As part of that uh that business, we have a digital assets management business which is part of our asset management business and that is oriented around building investment offerings for people and so that's where we launched our ETPs out of

and they continue to have a a long pipeline of ideas of things that we would like to be able to bring to market uh with time But we also do um other creative crypto things both in our incubator organization in our tech R&D lab. So we've we've got stuff sprinkled around. >> Well, you mentioned the Genius Act. Perfect segue to the next topic. So obviously this has been a huge year for crypto on the policy front. We at A6Z crypto along with so many in the crypto industry have been fighting for years for regulation, clarity from from DC. We finally got it. Genius. We're still down there fighting for market structure, but

there's still more. There's more work to be done, but we've accomplished a lot. So, how does having regulatory clarity now with the Genius Act, um, how does that impact Fidelity and its customers? >> The atmosphere, >> yeah. uh you know prior uh to the current environment there was you know back for a while when crypto was small you know it didn't really get a lot of attention and I think a lot of people thought oh kind of it's that crazy kooky technology thing and you would go to Washington and people kind of look at you like sideways a little bit like what are you talking about that >> either didn't understand it or they didn't like it >> yeah well what they mostly didn't

understand it and then I think after a while when they kept hearing about something they didn't understand that >> perversely made them not like it >> um and the fact that it continued to grow and then you started to have these negative antibodies come out >> and where things existing either existing and in many cases dated regulations >> started being turned around and used against crypto which um you know probably wasn't ever going to stick but it was you know it made everything unpleasant >> to say the least and I think for us as an established player we're in the

position where we've got a we've got a core business and we've got commitments to our existing customers and while we have lots of customers who were saying hey I'd like to do crypto in In fact, we we did a number of studies on this and um took kept track of how many customers called us and said, "When is Fidelity going to do crypto? Because I'm kind of thinking about it, but I have most of my financial relationship with you, so I'd like to do it with you or I'm kind of waiting for Fidelity to do it because I don't really want to do it somewhere else." And uh we actually had a number

of people in the organization this was really spectacular who took it upon themselves uh to raise their hand and say I want to help with this. So we have a we had a we had a cadre of reps which we formally organized just really because of their spontaneous willingness to want to tackle this who would take phone calls from people who were calling and wanting to talk about uh primarily Bitcoin at the time. So we started doing these uh foundational things to to try to you know keep everything warm while we hoped that the regulatory environment would evolve and of course it didn't

just evolve it kind of swung the other way. So that's been exciting to catch up with. >> So exciting. Um so you Fidelity recently put out a report on stable coins which we thought was great. Um, and now we have the Genius Act. What do you find most interesting and promising about stable coins? Everyone's talking about stable coins. >> Yeah. Yeah. Yeah. Yeah. Yeah. So, I I have to say my first reaction to stable coins was a little back I don't know how many years ago. Uh, it was a little like the custody business like like like isn't this kind of the opposite of this?

Why? I'm not I'm not totally sure. Then, you know, once I really started to realize how we were uniquely positioned to operate in this bridge space, I got all in on on the stable coin. And so, this has been um this has been exciting. And I think to the extent that there are lots of people that do more in this space, I think that's great. Uh I would say we fought and spoke up quite vocally for quite a period of time to advocate for paying interest on stable coins and this

was very hotly debated internally because we were line in the sand. You know this is what we do when people give us money. We either show them capital appreciation or pay them interest. That be we're at our core. We're an investment organization. We >> always want to give people more money back than they gave us. So the idea that we would take their money and hold it but not give them anything back or have no intent. Yeah. Seems it's it just fights with our values. And so we were, you know, up until the very end, uh, we were fighting for interest. You know, at

the end of the day, um, I weighed in and it felt to me like, frankly, it risked not getting it done if we didn't concede that point. So with a lot of disappointment, I would say we conceded that point. And um anyway, it it got done which was great. So the next question was you know what's the workaround for this because we don't like this. So I think we've come up with a pretty good workaround. We recently launched an um onchain tokenized money market fund and it pays the same kind of yield as our traditional money market

fund which has historically been top of the charts for the industry. So it's designed to be interoperable with a stable coin. So the idea is that you can hold your money in the tokenized money market fund, earn a very that you know the most competitive uh liquid yield that uh is available in the marketplace and and flip into a stable coin. >> That's great. That's great. Um love hearing the evolution really. >> So trying to get the best of both worlds. It didn't quite happen how I thought but it >> was so controversial within the banking industry, but love love how you you viewed it the right way. Um so we put out our state of crypto report

yesterday. We do this report annually state of crypto and one of our conclusions was that this has been the year of institutional adoption of crypto. 2025 is the year of institutional adoption and I've spent the past year with our go to market team meeting with big financial institutions including Fidelity. We met with your team and the one thing we kept hearing from a lot of organizations was they wanted to get into crypto but they had this dilemma of build versus buy. Do we build the technology or do we buy it? >> Yeah. >> And we talked through that a lot with folks. How do you make that determination?

>> This is a very consistent theme in our organization. It's either build versus buy. Sometimes it's build versus buy versus partner. And so we are more inclined to build compared to other similar kinds of financial institutions to ourselves. Uh but but you can't build everything, right? So you have to you have to make a calculated bet on where the point of strategic differentiation is going to be and figure out how to um one way or another uh make sure that you have your fingers on the controls of

that >> because that's really what gives you longevity. >> Right. Right. So we have a lot of builders in this room who would love to partner with Fidelity. uh what advice would you give to them as to how to go about that? >> Yeah, so we've got there's a a couple other people from Fidelity here. We love to hear from people. We love to have people in to visit. Um we've got a very robust and active bits and blocks club in Fidelity. We've got 4,500 members of that club. We host a lot of events where we bring people in um and cultivate a lot of networking. These are people who work in this um area but but also people

who work in any job in Fidelity. Anyone's allowed to join just you know if you're interested. Uh we also have regular forums with senior management where we bring people in from the outside to to listen to what they're uh what they're up to where there might be um general interest even though there isn't a clear specific stated interest. And then of course within our operating groups I mentioned we're always hosting things. So I I think um the it it's all very circumstantial to to try to answer [clears throat] that question, but we've we've had a number of uh partnerships

where we've worked with people and the whole nature of the crypto world is for everybody to do their part and connect to each other. So we want to continue to make sure that those conversations uh stay uh super active. There's no we don't have a prescription okay in our organization of you know this is the dos and don'ts of partnering with us. I think we're a little more flexible than that. >> Well you being here is a good first step I think for them. So so as we [clears throat] said we have a room full of founders here. uh they're all trying to build the next great company. And um in your own journey as as a company leader, president and CEO for nearly a

decade, what were the biggest lessons you learned in your evolution as a leader? >> I've learned so many [clears throat] lessons uh along the way. Um you know, stay curious. Um keep learning. I mean, I feel like if I'm not learning, I'm not doing my job. uh you know in terms of running an organization and and building culture that's something that continues to be a process and reinforced. I mean some of the things that I do is we have a lot of um mandatory mobility in our organization where we make people move around and do different jobs. We don't we don't let

people sit in the same job for too long. And I've found that to be incredibly valuable because it makes people develop different perspectives. And if you don't actively work to make sure that you're developing different perspectives, uh you tend to kind of calcify in in your views. So I think uh that's been really helpful. We've done a lot of work around uh cultivating an environment where we want people to bring bad news forward faster. I always tell people, don't bore me with the good news. It doesn't give me anything to do.

>> So, uh, you know, that that takes a lot of work, uh, to actually put that into action, >> right? Absolutely. Is there anything that you know now that you wish you had known back then when you were starting out? >> Well, um, [laughter] >> okay, there are many things, but what's one >> a mill? What's one thing? Um, you know, trust your instincts. I mean, you know, everyone has that inner voice that's gotten them to where they are now. >> Follow that that inner voice. Listen to it.

>> Good, good, very good advice. All right, so we're going to turn to questions now. Q&A. Um, we've got a lot of eager folks in the audience who want to ask you some questions. Uh, so let's let's kick it off. For folks in the audience, please try to keep the questions brief so we can get as many in as we can. Hi everyone, Abby, thanks. Um, I'm Exido. You actually started the IDO collab on on crypto in 2015. So, Fidelity started that group in 2015 and um, thank you for, you know, helping this industry forward. I guess one thing that's been interesting is like um, yesterday there was a lot of talk about how Genius unlocks stable coins and institutional adoption, but also the market structure bill is

coming, right? um curious like what your thoughts are on what that might unlock if it passes this year like next year looking ahead. >> Yeah, so our team is is very engaged with the market structure bill. Uh I feel like every time I get an update on it, I everything's completely changed. [laughter] >> I think that's an accurate assessment. And so I actually told people, maybe I don't need so frequent updates. Wait until it's getting >> Call me when it's signed.

>> Well, no, no, no, no, no. I want to start talking before it's signed, but it it needs to >> mature. >> It needs to find a few points of consensus. >> So, I'm kind of waiting on that. But we our team is we have a team that's very close to it. then I'm sure they would if they're not already connected would love to connect. >> Okay, who else? Thank you for everything you've done in crypto in the kind of cryptonative community. There's a sense that oh all of finance is going to be rebuilt and then uh from scratch on these new rails and then uh maybe in more of the trady sometimes in the past we used to hear people say this thing's

not even going to happen right and then there's a middle ground which is Tradfi adopts these new technologies and integrates them. Um, which one of those two paths, not even considering the one where it doesn't happen, but is it going to be completely rebuilt or is there kind of an evolution of it? >> Uh, well, there I think there's zero chance that it's not happening because it is happening, which is great. Um, you know, where I started with the 52 use cases a decade ago was more towards your first scenario. you know, how can this replace a lot of what we have in our system? Because if you think about the world of TRDFI right now, I mean, it's

the most complicated web of basically reconciliation processes. And it's it's really kind of scary. Like if you step back and look at it, you know, nobody would ever build anything like that. It's just something that evolved organically over decades and people used the best available technology for the thing that they were building today. But the first things that they built were built on the technology that was available then. And because everybody's so interconnected, you're kind of caught at that lowest common denominator of what now would be

considered by most people pretty primitive technology. So there's a real kind of existential challenge for the industry because I think at least some of the bigger players would like to upgrade the broader infrastructure a little faster, but it's the industry is a democratic place and there's a lot of small players who just don't have the wherewithal to participate. ate in that kind of an upgrade. So there's I I there I don't really even think it's a debate.

It's going to be that middle ground that you said. It's got to be an evolutionary process and it'll be some combination of competitive forces and regulatory standards that will kind of push it kicking and screaming along. Um, uh, right now I personally feel more drawn to things that offer us as, um, as a company the opportunity to do things that we haven't done before and to try to chart new courses and create new opportunities for our customers that

we haven't been able to offer in the past. And so I think you know the the thing that I one thing I learned you asked me what have I learned from you know 10 years ago. I think if I had learned, you know, how I didn't fully appreciate how slow change really [laughter] in our traditional business is because there's just so many forces that keep everybody kind of together and tight doing what they've always been doing. So >> change is not easy.

No, it's it it's Yeah, >> it's tough. Yeah. >> Yeah. There's a there's a tremendous amount of inertia in financial services and it's perversely because it's so interconnected. >> Yep. Yep. That makes sense. Okay, another question. >> Thank you for joining us. Um and also thank you for, you know, bringing legitimacy to this space all the way back to 2013. Um I still remember fondly those days at MIT where you know most of my colleagues thought I was crazy looking at this but then Fidelity came to to our sessions and our meetings and you know people started wondering okay Fidelity is here something must be happening. Um my question for you is uh about Bitcoin. Uh you've seen different

asset classes emerge and develop you know new instruments. Uh where do you think Bitcoin is going next? And it's not a question about price. is more a question about where does it fit in in the landscape of everything you're offering. >> Yeah. >> Thank you. >> Yeah. Um so I don't know if it's because I started early or I don't know maybe as I get older I'm just kind of oldfashioned but like I kind of like Bitcoin. Um, I I don't own tons of coins, but I own Bitcoin, and I think it will continue to play a role in the savings hierarchy of lots of people, and it's a it is the gold standard, so to speak, um, you know, in the crypto

world. and it's been around and it's solid and it's persisted and it's a it's a good system. So, I'm long-term very comfortable and I think that that will continue to be something that we will factor into our thinking and our quest to provide options for our customers. And I'd like to be able to be one of the people that makes it continues to make it a little more accessible because for all of the genius that went into designing Bitcoin, um it probably could have used some IDEO resources maybe to help help more people

engage with it sooner >> and more easily. Yeah, >> that is great. Okay. What who else would like to ask a question? >> Ideal Collab is actually the first paycheck I ever received as an intern. So that's crazy. Thank you for that. Um, as a CEO in balancing, you know, risks and bets versus like standard operations for the business, what is your process of building conviction behind a new bet when you're experiencing resistance from your own organization? >> Uh, yeah, great question. Um, so part of what I described earlier around moving people around and trying to cultivate uh a team with lots of different

perspectives and uh convictions you actually uh one of the happy byproducts is it tends to generate internal debate which I think is part of any healthy organization. Um, you know, there's some fine line between healthy debate and sliding into a religious war. And so we crypto did kind of arouse some very primal feelings amongst a lot of people and definitely for a period of time slipped into that kind of religious war. And I think you

saw the evidence of that with many TRDFI leaders speaking out in um surprisingly immature but very loud ways uh about anti- crypto stuff. And I kind of felt like I knew I just had to be patient and just kind of keep going and that the noise would pass and maybe this was people's way of feeling frustrated because something that they didn't understand was gaining momentum and try to help people through that um by not escalating the religious war and

um yeah so it's it's you know allowing people to speak their mind but stay calm and continue to do their jobs uh and that included some jobs that were exploring Bitcoin and other crypto stuff that we were working on. So what you know I think creating structurally to the extent that we had created this R&D lab which was actually something that was started by my father so it's super wellestablished been around for decades our internal incubator which was something that I institutionalized these are spaces where they're safe spaces to just go and do stuff that might fail

and you know that's what they're supposed to do and we don't if if I say to people all the time, you know, if everything we do is successful in our labs organization, you know, we're not taking enough risk and we've got to have some fast hopefully fast failures uh who that that happen there and and otherwise we're not pushing the limits enough. So if you can get that institutionalized, then you create that much needed license for people to do stuff that not everyone is on board with.

>> That's very interesting and very similar to the venture capital. Yeah. Yeah. Yeah. >> If every company we invest in is a success, we didn't go broad enough. We didn't take enough risk. >> Yeah. Yeah. No, I took a page out of your book. Thank you. [laughter] >> That's great. Love it. Uh, okay. Who else has a question? I see some hands. If if we're going to end up in a world where there's convergence between digital assets and traditional assets, do you have a vision for what the crossover is going to be? Like what are we going to start doing in digital assets from Tradfy? What is Tradfi going to start doing from digital assets?

>> Yeah. Uh in short, some of both. uh you know I um as I said you know I'm more excited about the new stuff that we're going to bring to people and uh less excited about trying to do fundamentally the same thing that we're doing just with different technology underneath. And I think there's but that's not it's not quite that simple though because if you go back to the premise that I have that there is secular deflation in our business. all

the technology is going to have to change eventually. And you know, so we started moving our core operations to the cloud a bunch of years ago and it we kind of had to mess around with it for a few years to figure out how to get it right and make it super reliable and super safe. And you know, fortunately, you know, we had we had some some lowrisk uh situations that we put out there and we learned a lot from those situations. Um and you know, so that was a big secular move for us to transition to to that and that's still

actually um ongoing. So you kind of can't help but ask, you know, is some of the capability that might someday obsolete that web of reconciliations that is the industry today with a blockchain. Yeah, you can you definitely see that it's just the path the migration path and I think more importantly the the pace of that migration path. It's it's really I think you just have to kind of watch it and feel where it's going. I I I don't know. So I

we're focused on building technology that is kind of our best bet of where where we think things will likely go near term. But you know have that that longer term view. And I think the surprise for me has been that it it's closer in on that curve of um uh of of being in that the bridge space like doing things where there's a use case. Uh so with the the stable coin the tokenized money market fund where you know you need that stable coin to participate in the DeFi world but you

you have to if you want to earn interest on it then you need this you know digital version of an oldw world product. So um so I wish I could bring more science to this. I think this is um you know this is the hard question. It is the quintessential question that I think everybody in this room has to try to uh try to answer but also try to drive at the same time. So we're the cause and the effect to some extent.

>> No it's a difficult question as you said very difficult question to answer. >> Yeah. >> Yeah. >> Okay. Do we have another question? you. We've exhausted the remote. >> We've exhausted the remote. Oh, there's one more. One more. >> You've talked twice about or breakfast earlier about secular deflation. And my interpretation of that was technology makes prices come down for everything. Why from externally it seems that different financial institutions have different affinities towards new technology? And I'm curious what determines an organization's appetite to adopt things like crypto.

Uh that that's a great question because um it's a combination of time horizon and um I think willingness to take a smidgen bit of not so much regulatory but you know people in the traditional business you know they always talk about reputational risk. So, you know, this was kind of the thing that got thrown around Fidelity a lot during some of the more contentious years. You know, what's the reputational risk of us being in this space? You know, even if we weren't doing really

much of anything, I mean, that when we did the that first thing with the charitable gift fund where we took the donations, we're taking donations from people who have just made their money from Bitcoin. I mean, it felt felt a little crazy to me, but it didn't feel crazy to a lot of other people. And so, I think it's just personal. And I think I mean, here in this room, you guys are all here because you're creative thinkers and you've got healthy risk appetites.

But in particularly in big companies and I think particularly in financial services that doesn't really it's not a breeding ground. I mean if you sure some investors I mean all the people who run portfolios or hedge funds I mean these are all riskseeking people but they're doing it within a box that's defined and they're probably not thinking about in fact I'm sure they're not thinking about the nuts and bolts that underpin their ability to do what they do. And I do think that's something that makes Fidelity a little bit unique in that we

really elevate thinking about the nuts and bolts of the technology that underpins our ability to do what we do. Because we've learned over the years that the more of that technology that we've been involved in building or tailoring or customizing to our use is what brings us competitive advantage and sustainable competitive advantage because we um we can keep it up to date and have the latitude to make the moves that we want to move make. Um but not that that's not really traditional financial services

thinking um based on what I see. So >> all right well Abby this has been a great discussion. Thank you again so much for coming and and chatting with all of us. It's really been fascinating for us. >> Thanks for having me. Thank you. [applause]