The Node: How Do You Know Crypto Is Winning? Look Where the Talent Is Going

The Node: How Do You Know Crypto Is Winning? Look Where the Talent Is Going

Then there are the regulators who have made their home at crypto upstarts. Former acting Comptroller of the Currency Brian Brooks took charge at Binance.US the same day former top U.S. commodities regulator Chris Giancarlo joined BlockFi’s five-person board.

These are figures who, as part of their remit, had large swaths of the economy under their supervision and identified the most dynamic and personally rewarding opportunities as being in crypto.

“The internet is a remarkable social and technological phenomenon. It’s by no means seen its course. What it’s done first to information then to retail and transportation, it’s now doing in financial services in a very broad way,” Giancarlo said the morning of his announcement, on CoinDesk TV.

These human flows demonstrate the viability of what’s being built in crypto. Capital deployment is a big indicator, and there are crypto projects doing big numbers. But that’s all a calculated risk, a gamble, a hope for yield in an economy where everything seems to offer returns. Tomorrow Tesla could announce it sold its BTC horde.

Human beings taking jobs in crypto is different. It’s stickier. But it also gives a peek into the industry’s dynamics. People may be motivated by competitive salaries or startup equity, but they may also have harder-to-define motivations, such as a belief or feeling that crypto is the future.

Employment reports consistently show blockchain skills are in high demand.

“The bitcoin and crypto industry has the highest asymmetry opportunity in any industry, so it is not surprising to see thousands of people moving from legacy businesses to these disruptive upstarts,” the influential Anthony Pompliano said over email.

Pomp kicked up a crypto jobs board four months ago to help place the experienced and inexperienced in open crypto roles. He says 50,000 people have already applied for positions, and as many as 20 people have been hired.

Mike Wen recently left Apple to go “all in on crypto.” He says he followed a familiar path for millennials: used BTC to buy a fake ID in 2014, invested in “the next wave” in 2017 and started to get curious again about DeFi in 2020. And now he’s hooked.

Crypto is Not the Way Out

Blind infatuation with digitalization, fintech and cryptocurrencies is not the answer to everything ailing Swiss finance.

From a distance, it seems like the collective consciousness of Swiss banking sees a form of business salvation in the miasma emanating from the still awkward mix of state-of-the-art technology and traditional banking.

It is understandable. Years of negative interest rates and the fear of asset inflation make technology look like a facile answer for an industry going through near-constant turmoil. But regardless of what you call it – digitalization, tokenization, digital assets, fintech, cryptocurrencies, stablecoins, or anything else – the reality is that most of the incumbents are already in place.

Little New in Payments

Digitalization of payments is essentially done. It has been over five years since the introduction of Apple and Android Pay in western economies and more than a decade since the social network/payment app Weixin (Wechat abroad) was introduced in China. And before all that, there was PayPal.

There might be incremental improvements, but it is hard to see a legacy financial institution or a start-up knocking any of the established providers off their perch.

Asset Digitalization Well Underway

The process of the digitalization of standard investments and the expanding inclusion of wholly digital assets as alternative investments is well underway. You can even make the argument that plain equities have been digital(ized) assets for quite a while.

For Swiss finance, this should be a clear-cut situation.

Because of their volatility, cryptocurrencies, and anything similar, can potentially form a portion of a segregated segment of high risk or a very high-risk client’s portfolio that has undergone appropriate suitability reviews.

It is hard to see that much potential beyond that - unless someone wanted to become a special-purpose broker-dealer and get into the digital asset custody business in a big way.

Legacy Bank Digitalization

Many banks have been digitalizing their procedures and frontlines since the early 2010s, with mixed results. As an example, HSBC has been using chatbots in a variety of guises for the better part of a decade. It has even deployed actual robots.

But none of this has appeared to have improved front-line effectiveness, cut costs or slimmed internal processes to the point that it has prevented the institute from constant rounds of restructuring, including the recent announcement that it would exit the U.S. retail business. In the same vein, nobody seems to be eating its lunch quite yet given it remains a sizeable, profitable institution.

You can probably digitalize traditional banking or create a fintech that simplifies banking processes at far lower costs. But, at some point, you will have to deal with detailed regulation in each country on a minute, manual – and very costly – level. Recent experience with Chinese fintech indicates that shortcuts are unlikely.

Crypto Versus Fiat

You can argue ad nauseam about whether cryptocurrencies will replace fiat currencies. But as China and the U.S. Securities and Exchange Commission show, the likelihood of sovereign governments gliding into a happy state of decentralized investments, undeclared payment vehicles or currencies, is non-existent – at least not for banks and securities firms authorized by the Swiss Financial Market Supervisory Authority (FINMA).

There are few governments that are ever going to tolerate a second, parallel form of anonymous cash or e-cash for long, and this is not an argument Swiss finance should be a big part of.

No Easy Answers

It is easy to get caught up in this stuff. It is different, and it is new. But a wealth manager would do better in the long-term to make sure that its house is in order, that it has full documentation, electronic or not, of client sources of wealth and funds, and adequate controls and scrutiny of its payments.

As recent Julius Baer and J. Safra Sarasin fines show, after a recent history of much worse, this still isn’t the case.

SC Ventures to Support Green Crypto Mining

It said that for cryptocurrency to continue into the mainstream, support for more sustainable crypto-mining will need to accelerate to negate the potential environmental harm caused by current process.

SC Ventures, the Standard Chartered bank’s innovation, fintech investment and ventures arm has launched its latest Fintech Bridge challenge, which is looking for ready-to-deploy solutions that will help with making the crypto mining ecosystem more sustainable.

This includes energy management software and services, energy or miner marketplaces, energy waste transformation solutions, microgrid optimization, ASIC manufacturing, and green coin protocols. Fintech Bridge challenges offer committed funding from the bank, one its ventures, or one of the bank’s clients, and the current one closes on June 18.

Zer0-Carbon «is a Must»

«We have a firm conviction that digital assets, including cryptocurrencies, are here to stay as an asset class. However, the environmental impact from crypto mining remains problematic due to its energy-intensive process,» Alex Manson, head of SC Ventures, told finews.asia.

«Zero-carbon is a must for us and our future generations to remediate climate change. This challenge is one step to address one of our industry’s key challenges in doing things sustainably,» Manson added.

Digital Asset Exchange

On Wednesday, the bank also announced a partnership with BC Group, which operates digital asset platform OSL, to establish a U.K.-based institutional digital asset trading venture. The JV, planned for the fourth quarter of 2021, will connect institutional traders to counterparties across markets, delivering access to pools of liquidity in bitcoin, ethereum and other digital assets, according to the announcement.

BC Group CIO Usman Ahmad was appointed CEO of the new entity, while Nick Philpott of SC Ventures was appointed COO.

The bank has previously announced a strategic partnership with Northern Trust to launch an institutional-grade custody solution for cryptocurrencies, and has invested in Metaco, which runs an institutional operating system for digital assets.