Good morning! BNY Mellon is getting into crypto. But as you might expect from America’s oldest bank, it’s not rushing into it.

Slow and steady wins the race

Caroline Butler joined the Bank of New York Mellon as CEO of custody services two years ago to ensure that the assets of the country’s oldest bank’s clients are safe and secure.

That job could soon become much more challenging: The bank announced it will start holding crypto assets for select clients, marking a major move by a traditional financial services giant into the controversial crypto market.

Institutional investors still want in on crypto despite the crypto crash, prompting the bank’s entrance into the space. Butler told Protocol’s Ben Pimentel that the bank has been looking for a way into digital assets for two years, with the spike in demand being the catalyst to actually do it.

• Because the “vast majority” of BNY’s clients were already invested in digital assets in some way, and no other traditional institution offered anything similar, becoming a one-stop shop made sense, Butler said.
• “[I]t was very important to be able to go to a provider who could offer services across the different assets in their investment portfolio, whether it was traditional assets or a combo of digital assets,” she told Ben.

BNY’s move doesn’t come without challenges. Butler said heightened cybersecurity is crucial to keeping the bank’s digital assets safe: “[U]nlike the traditional space, if you lose the keys to digital assets, you effectively lose the assets.”

• Within security, Butler is focused on wallet management and infrastructure. Interoperability “across the digital and the traditional space” is also something the bank wants to get right. “It goes back to that client experience,” she said.

Entering this space can’t be rushed. Though the fintech industry criticized traditional banks for their pace, BNY is going slower to be “measured and purposeful, bringing our capabilities to market in a very disciplined form.”

• And despite the reluctance from traditional banks, Butler said BNY’s institutional clients need a safe place to test the crypto waters. “They’re needing our institutional-grade standards to come into this market to help mature it in a safe and responsible way.”

Read more: How Caroline Butler is helping America’s oldest bank dabble in crypto.

Save the whales

The offshore wind industry may be threatening the survival of one of the most endangered whale species on Earth, Protocol’s Lisa Martine Jenkins writes.

Boat traffic and offshore infrastructure need to skyrocket in order to reach the Biden administration’s goal of developing 30 gigawatts of offshore wind by 2030.

• But North Atlantic right whales are facing an “unusual mortality event,” which the National Oceanic and Atmospheric Administration largely attributed to “rope entanglements or vessel strikes” in a recent report.
• Underwater noise pollution from construction can also damage whales' hearing and behavior.

Startups are working to find solutions. Vineyard Wind, an offshore wind developer, and Greentown Labs, a startup incubator, created an accelerator program for companies developing tech to protect marine life.

• Some of the innovations include aerial drone systems for sea inspection and night-vision cameras that can be customized to work on offshore turbines.

The government wants to help, too. The Department of Energy and the state of Maryland have funded marine mammal research group SMRU Consulting for its work on a “coastal acoustic buoy for offshore wind.”

• The buoys detect high-frequency whale calls to pinpoint their location, allowing an offshore wind developer to know when it should slow or stop construction.

The risk to right whales shows the need to balance mitigating climate change and conservation — and how people are trying to use tech to keep the scales stable. Whether these efforts are enough remains to be seen.

Read more: A version of this story appeared in Protocol’s Climate newsletter. Sign up here.

​The itch for something new

Brad Olson spent six years growing Peloton’s subscription business into a common household product. Now he wants to “do it all over again.” Last month, Olson became CEO of Sollis Health, a subscription-based concierge health care startup that gives members 24/7 access to doctors, ER, and urgent care with no wait times.

Olson is a first-time CEO, but his last two roles at Peloton prepared him “uniquely” to run Sollis, he told me in an interview.

• Olson served as chief business officer and chief membership officer in his time with the company, giving him skills such as B2B sales, program management, and cost management.
• He also learned how to grow a subscription business: While at Peloton, Olson helped expand its membership by 100 times.

Leaving Peloton was less about Peloton itself, and more about scratching “the itch to join an earlier-stage company,” Olson said.

• “There’s been so much growth in concierge medicine, and Sollis to date is the only player in the market that is addressing urgent care and emergency care,” Olson said. “So in a similar way, the co-founders here at Sollis created a new category — just like the founders at Peloton.”
• And Olson has seen firsthand that the U.S. health care system needs help. “I live with multiple sclerosis,” he said. “I’ve seen the best and the worst that the U.S. health care system has to offer, and urgent and emergency care can be terrifying, especially for folks that have underlying conditions.”

But first-mover advantage doesn’t last forever, he told me. Keeping up a successful growth subscription-based business requires putting members first. “If you make your members your North Star, and put them at the center of every decision, you can’t go too wrong,” he said. “It’s this sort of virtuous cycle: If it’s good for the members, it's good for the business, it's good for the employees, because it presents growth and opportunity.”

Read more: How Brad Olson decided to leave Peloton.

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Many business leaders aren’t sure where to begin when it comes to migrating to the cloud. To help organizations adapt to this revolution, Capital One launched Capital One Software, a new enterprise B2B software business focused on providing cloud and data management solutions.

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People are talking

Transportation secretary Pete Buttigieg said EV adoption will require drivers to accept shorter ranges:

• “[W]e tend to buy cars for our longest trips, not our most frequent trips. It will take a while for us to close the gap between the range we think we need and the range we actually need.”

Investor Chris Sacca said that climate investing is “recession proof”:

• “[T]he reality that clean energy and clean products are reaching price parity are just massive tailwinds that we’re trying to keep up with, frankly.”

SAP has reached a “tipping point” in cloud growth and profit, CEO Christian Klein said:

• “Two years ago actually, we started the transformation of SAP where we said, ‘Hey, we want to move our portfolio completely to the cloud, because this is where we can serve our customers best.’”

The iPhone will switch to USB-C as a result of a recent EU ruling, Apple’s Greg Joswiak said, but he doesn’t sound thrilled about it:

• “Obviously we’ll have to comply, we have no choice.”

Making moves

AWS executive Pravin Raj is leaving Amazon. Raj is one of several of the cloud giant's top leaders named in a discrimination and harassment lawsuit by a former employee.

Alexander Höptner is stepping down as CEO of crypto exchange BitMex after around two years with the company. Stephan Lutz has been appointed as interim CEO.

EV startup Faraday will cut salaries by 25% to preserve cash. The cuts, lasting from Nov. 1 to the end of the year, come as the company seeks funding to release its first car.

Memory chipmaker SK Hynix is cutting investment by more than 50% due to "unprecedented deterioration" in demand for its hardware.

In other news

Apple said it would make new investments in wind and solar projects in Europe, as well as call on its suppliers to decarbonize production of its products.

Elon Musk plans to close the Twitter deal by Friday, complying with a Delaware court ruling, according to Reuters.

Amazon is testing Venmo. All U.S. customers will be able to use the service by Black Friday.

India fined Google $113 million for anticompetitive practices for restricting app developers in the country from using third-party billing or payment processing services.

Twitter is losing some of its heavy-hitter users. At least, if you count heavy hitters as those who account for less than 10% of monthly overall users but generate 90% of all tweets and half of global revenue.

Alphabet’s earnings fell short of Wall Street’s expectations as the digital ad industry continues trending downward.

Microsoft reported its slowest revenue growth in five years. Weakening device demand hasn’t helped, but even cloud revenue was lower than anticipated.

Amazon warehouse workers in Southern California abandoned their plans for a union election following the labor union’s defeat in New York last week.

Uber drivers in New Zealand won a class-action case declaring them employees rather than independent contractors.

The celebrity deepfake promo

Deepfakes of anyone from Tom Cruise to Elon Musk have started to make their way into advertising. While some of the ads are parodies, the continued evolution of deepfake software could create a legal gray area as celebrities navigate new forms of unauthorized use of their likeness. “We’re having a hard enough time with fake information,” one expert told The Wall Street Journal. “Now we have deepfakes, which look ever more convincing.”

A MESSAGE FROM CAPITAL ONE SOFTWARE

The flexibility of the cloud helps companies like Capital One unlock access to their data with performance that can scale instantly. But this flexibility and scale can also create a unique challenge for organizations and users who are not proficient in cloud optimization.

Learn more

Thoughts, questions, tips? Send them to sourcecode@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

Brad Olson is the new CEO of Sollis Health, a concierge health care startup that gives members 24/7 access to doctors, emergency rooms, and urgent care with no wait times. He joined the company in September after a six-year stint at Peloton, where he held various roles, including senior VP of member experience, chief membership officer, and chief business officer.

At Peloton, he played a major role in the growth of the company’s subscription business. Now he’ll take on growing Sollis Health, which relies on subscriptions for its business model, as a first-time CEO.

Olson’s story, as told to Protocol, has been edited for clarity and brevity.

The way I think about it is less that I walked away from Peloton, but more that I ran toward the opportunity I saw in Sollis Health. I loved my time at Peloton. The six or so years that I was there were formative in my career, fast-paced and exciting. We grew the size of Peloton membership by 100 times while I was there. And after six years, Peloton had become a pretty mature business, although it's still growing and changing in different ways. Frankly, I got the itch to join an earlier-stage company and do it all over again.

I got a call from a recruiter on behalf of the Sollis board back in April. When she explained the company to me, I sort of fell in love with the concept right away, so much so that my husband and I joined Sollis as members long before I got a job offer. The idea just felt like such a great match for what we wanted in our lives. I live with multiple sclerosis, and I have since 2016. As a result, I spent more time than most in doctors offices. I've seen the best and the worst that the U.S. health care system has to offer, and urgent and emergency care can be terrifying, especially for folks that have underlying conditions.

While I'm a first-time CEO, the last two roles that I held at Peloton prepared me uniquely for this opportunity. Before I was chief business officer, I was chief membership officer. And in that role I ran P&L for Peloton’s subscription business, which at the time was an $800 million business that relied on recurring revenues from members. Serving as the general manager of that business prepared me to take on a CEO role. When I took on the chief business officer role, that brought new responsibilities like business development, B2B sales, program management, cost management, and general management: skills that I think made me a better leader.

There's been so much growth in concierge medicine, and Sollis to date is the only player in the market that is addressing urgent care and emergency care. So in a similar way, the co-founders here at Sollis created a new category — just like the founders at Peloton. With that I think comes an immense opportunity to set the standard of care and member experience and to grow something really special.

The biggest lesson I learned in my time at Peloton is to put members first. What I've learned over the past 10 years … is if you make your members your North Star, and put them at the center of every decision, you can't go too wrong. If you create an amazing, unparalleled member experience or customer experience, that's going to drive acquisition, it's going to drive word of mouth, and it's going to drive retention, particularly in a membership or subscription business. It's this sort of virtuous cycle: If it’s good for the members, it's good for the business, it's good for the employees, because it presents growth and opportunity.

Caroline Butler, CEO of custody services at Bank of New York Mellon, joined the Wall Street giant two years ago to ensure that the assets of the country’s oldest bank’s clients are safe and secure.

Her job is about to become potentially more challenging. Two weeks ago, BNY Mellon announced that it will begin holding crypto assets for select clients. It marked a major move by a financial services giant into a fast-moving and controversial market, one notorious for breaches and hacks and still reeling from a major crash.

But the crypto meltdown, which wiped out $2 trillion of value, has not dampened the interest of institutional investors in digital assets. BNY Mellon said its decision was based on strong customer demand.

“We were getting a lot of demand from our clients to be able to, as a trusted provider, be able to service them,” Butler told Protocol. “Custody was really the first capability that was paramount for our clients.”

In an interview with Protocol, Butler, who spent nearly 20 years at J.P. Morgan before joining BNY Mellon, explained how the bank decided to dive into crypto.

This conversation was edited for clarity and brevity.

How did BNY Mellon reach the decision to support crypto?

We started on this journey in earnest about two years ago. We expressed our intention, as you probably read about, in February of last year.

Really, it wasn't led by crypto. It was to create a digital asset platform. We look at digital assets across three large spectrums: There's cryptocurrencies, I put those in one bucket. Traditional tokenized assets are in a separate bucket. And then natively tokenized assets will be the third.

We wanted to make sure that we were bringing a product to market that had the ability to service [customers] across those different types of digital assets. We started with crypto because that's where our client demand was.

Custody was really the first capability that was paramount for our clients. It sets the foundation for the full platform.

We'll add on different capabilities as we see more demand. And we'll start to go across the different asset types as well, pending where clients need us to go, and where the regulators permit us.

What were some of the most contentious issues?

The biggest challenge in this space is without consistent regulations globally, we really had to bring our highest institutional-grade standards to bear into the market. We know how to keep clients’ assets safe. We've been doing that for a very long time.

Obviously, there are unique risks in this type of asset class. Making sure that we brought those higher standards to bear into the market to protect both the client and the investor in ensuring that we added safety and soundness to protect the assets was paramount, but also doing it in a way where the clients’ experience is front and center.

If you think about the types of institutional clients we service, a vast majority of them have a percent of their investments in digital assets. For them, it was very important to be able to go to a provider who could offer services across the different assets in their investment portfolio, whether it was traditional assets or a combo of digital assets.

That experience was very important. Not having a player like ourselves in the market, the reality was they had to go to a digitally native custodian for their digital assets, and then a traditional custodian for the rest of their portfolio.

That puts a real burden on the clients to be able to do things like reconstruct a portfolio to enable compliance reporting, tax reporting, or various different things like that.

So the client experience was also a key driver for us in how we designed the product. Obviously, risk, first and foremost: That's how we design all our product offerings. It’s particularly important for this asset class.

Can you go deeper into that? What were some of the risks and concerns that came up in the conversations?

When you look at digital custody, [what’s] very important is cyber risk. If you think about what we do as a bank, we custody somewhere around $43 trillion worth of client assets. Clearly, we have very thorough and robust cybersecurity departments that manage all the protection of those assets. We also deal in the trillions when it comes to payments.

[There are] unique risks you have in this asset class, the primary one being, unlike the traditional space, if you lose the keys to digital assets, you effectively lose the assets. So heightened cybersecurity is very, very important.

Implicit in that is wallet management. What we've done and what's been very important for is we looked across the industry at specialized firms. So you would have seen that we made an investment in Fireblocks. It takes the best of what they do very well, which is wallet management and infrastructure.

The other area that was a challenge was interoperability across the digital and the traditional space. It goes back to that client experience. What was very important for us was to make sure that we actually took the digital asset platform that we've built and had it fully interoperable with the traditional platforms. That is not an easy thing to do.

You made this decision at a time when crypto is reeling from a major crash. Is there a story or a conversation you had with a client in terms of concern that stands out for you?

The consistent story we hear from clients is they want to know that they have a trusted bank that's highly rated, who knows how to protect clients’ assets, who would bring those institutional-grade standards that don't necessarily exist consistently in this particular market. That they can also marry that trust with a bank who has proven that they can innovate in an agile form.

One of the criticisms that you will see from the fintech world or the digital world of the traditional world is the pace at which we move. One of the things we're seeing more and more from our clients is they're appreciating that we have the ability to innovate in a very measured and prudent fashion.

Where we are slower is because we're being measured and purposeful, bringing our capabilities to market in a very disciplined form. Again, that speaks to trust and risk management.

We're really seeing even across the diverse types of clients that we have, there's a real appreciation now of bringing those risk management principles into this market. I don't know how many times we’ve heard the word “trust” used by our clients.

Our clients, they're always thinking about the next step. What’s important for our clients is not just the custody element of what we're doing. It's [also] the ability to add even more services as we start to see the market open up a little bit more.

We will meet that demand, whether it's execution, or other capabilities, driven by our clients and driven by our regulators. Clients don't want that bifurcation and the operational burden on them. But they also want to make sure that the basic principles of trust are in place and those are the guardrails we build on.

Crypto, of course, is a broad industry. Can you walk me through some of the assets your clients are interested in?

Specifically, what we're aligned with now is the ability to custody bitcoin and ether for a select number of U.S. clients. That's where our client demand is. The clients we’re partnering with to deliver this service had already made investments in those currencies and just needed a service provider.

We will be very, very disciplined on the expansion of currencies outside of those two. Each currency brings its own unique risk profile. So we will be putting [those] through our protocols internally to assess if we feel like those currencies can actually meet the standards that we would expect, and therefore that we would service.

We will expand the offering past cryptocurrencies pending demand into other types of assets. We're seeing a lot of interesting projects in the bond space. We've got a lot of clients that are discussing tokenization of real assets with us.

I would say the tokenization side of the market is less mature. There are more POCs [proof of concepts] in that space than the crypto side. There are a lot more projects that are in either an ideation space, or are narrow projects that people that are starting to work on.

Can you talk about your own personal insight into bitcoin? I see you spent nearly 20 years at J.P. Morgan before moving to BNY just recently.

You're trying to age me. I was with J.P. Morgan for 18 years. I moved here over two years ago. I like to call myself a banking veteran.

I've always been on the product innovation side, starting in the trading desks, and then moving into derivatives clearing, collateral management, and the last five years in custody. So I've always specialized in innovating new products.

DLT [distributed ledger technology] is just another technology. The ability to move assets more efficiently is always something that would be attractive just given my role. A consistent part of my role over the different areas has been learning new technologies and seeing if those technologies actually solve some of the problems that exist in the industry.

One of the more interesting things about distributed ledger technology is how much that technology could aid in making current processes in the traditional space more efficient.

There's a segment of crypto that rejects the role of centralized major institutions like BNY and other banks. How do you plan to navigate that?

We're the world's largest custodian so we represent a large number of institutional clients. Our institutional clients are asking us to come into this space as a trusted provider with a track record of innovating and leveraging new technologies. So they're needing our institutional-grade standards to come into this market to help mature it in a safe and responsible way.

This asset class has become mainstream already, and we'll do our part to make sure it does so safely for our clients.

Over the past several years, SAP CEO Christian Klein has been on a mission to accelerate SAP into the cloud. The enterprise resource planning giant beat earnings expectations on Tuesday despite a rough quarter for a lot of software companies, perhaps a sign that it is starting to turn a corner.

The company posted third-quarter revenue of €7.8 billion ($7.7 billion), while cloud revenue rose 25% year-over-year to €3.29 billion.

“Two years ago actually, we started the transformation of SAP where we said, ‘Hey, we want to move our portfolio completely to the cloud, because this is where we can serve our customers best,” Klein told Protocol in an interview Tuesday after the release of its earnings.

This quarter’s earnings show positive signs, but it hasn't been all smooth sailing over the past three months. The war in Europe and broader macroeconomic uncertainty led SAP to lower guidance last quarter, and the company has struggled to move its legacy ERP customers into the cloud.

But Klein said he anticipated this. “We said, ‘Hey, the next two years our profit ambition will come down because we are changing from up-front to a subscription-based license model.’”

In the past SAP has struggled to move its customers to the cloud. That’s why the company introduced its RISE with SAP initiative early last year, which is intended to take customers “by the hand” and guide them through their cloud migrations, said Klein. It seems to be working: “Our flagship product S/4HANA has seen 108% growth,” he said.

Although SAP is intensely focused on migrating customers to the cloud, it still has to support its on-premises customers. For instance, some public sector customers might want their software on-premises in their own data centers, said Klein. “We are a big believer that while more and more customers move to the cloud, there will also be hybrid landscapes,” he said.

SAP also faces challenges in Europe, where the company is headquartered. Europe is a difficult market to sell enterprise software to because of the existence of member states, high standards for data privacy and sovereign clouds, and the recent geopolitical risks, Klein said.

Despite these challenges, Klein is still confident about SAP’s future. The company maintained its fiscal year guidance of €11.6 to €11.9 billion and remains bullish on the need for ERP software in a world of “disrupted supply chains.”

Moving forward, SAP plans to build more data centers in additional countries, hire talent across Southeast Asia and the African continent, and increase focus on its core products. That includes S/4HANA, supply chain, and HR in some areas, but not contract management for example, said Klein.

Overall, Klein seems unfazed by SAP’s challenges over the past several years. “We said to the financial market, 'Please trust us, we are going to master this transformation. And after year two, you’re going to see higher recurring revenue, and also higher operating profit,'” he said.

Today Klein feels SAP has reached a “tipping point” in cloud growth and operating profit. Next year, he said, SAP will deliver on both.

Over the past several years, SAP CEO Christian Klein has been on a mission to accelerate SAP into the cloud. The enterprise resource planning giant beat earnings expectations on Tuesday despite a rough quarter for a lot of software companies, perhaps a sign that it is starting to turn a corner.

The company posted third quarter revenue of €7.8 billion ($7.7 billion), while cloud revenue rose 25% year-over-year to €3.29 billion.

“Two years ago actually, we started the transformation of SAP where we said, ‘Hey, we want to move our portfolio completely to the cloud, because this is where we can serve our customers best,” Klein told Protocol in an interview Tuesday after the release of its earnings.

This quarter’s earnings show positive signs, but it hasn't been all smooth sailing over the past three months. The war in Europe and broader macroeconomic uncertainty led SAP to lower guidance last quarter, and the company has struggled to move its legacy ERP customers into the cloud.

But Klein said he anticipated this. “We said, ‘Hey, the next two years our profit ambition will come down because we are changing from upfront to a subscription-based license model.’”

In the past SAP has struggled to move its customers to the cloud. That’s why the company introduced its RISE with SAP initiative early last year, which is intended to take customers “by the hand” and guide them through their cloud migrations, said Klein. It seems to be working: “Our flagship product S/4 HANA has seen 108% growth,” he said.

Although SAP is intensely focused on migrating customers to the cloud, it still has to support its on-premises customers. For instance, some public sector customers might want their software on-premises in their own data centers, said Klein. “We are a big believer that while more and more customers move to the cloud, there will also be hybrid landscapes,” he said.

SAP also faces challenges in Europe, where the company is headquartered. Europe is a difficult market to sell enterprise software to because of the existence of member states, high standards for data privacy and sovereign clouds, and the recent geopolitical risks, Klein said.

Despite these challenges, Klein is still confident about SAP’s future. The company maintained its fiscal year guidance of €11.5 to €11.8 billion and remains bullish on the need for ERP software in a world of “disrupted supply chains.”

Moving forward, SAP plans to build more data centers in additional countries, hire talent across Southeast Asia and the African continent, and increase focus on its core products. That includes S/4 HANA, supply chain, and HR in some areas, but not contract management for example, said Klein.

Overall, Klein seems unfazed by SAP’s challenges over the past several years. “We said to the financial market, please trust us, we are going to master this transformation. And after year two, you’re going to see higher recurring revenue, and also higher operating profit,” he said.

Today, Klein feels SAP has reached a “tipping point” in cloud growth and operating profit. Next year, he said, SAP will deliver on both.