The last year has seen its fair share of professionals in mainstream finance making the move into the cryptocurrency industry.
As an aside, it will be interesting to see if the trend maintains its pace going forward. Considering the rapidly growing focus on Bitcoin’s blockchain technology, there is copious innovation taking place for non-financial applications. Examples include land title registries, accreditation for intellectual property, and the prospective Internet of Things.
Even so, let’s not forget that some of the most active research areas for blockchain technology are securities trading, payments and currency conversions. But here too, it is Bitcoin’s technological features that are being explored, not its economical attributes.
But during the past 12 months, we have witnessed the frequent entry of often senior-ranking financial service professionals into the crypto space.
At least three senior figures from JPMorgan are now executives at digital currency startups. Among them are Blythe Masters, now leading Digital Asset Holdings. Her ex-husband, Daniel Masters, is the head of Global Advisors, a commodities-focused hedge fund that launched a Bitcoin fund last year- and also a former trader at JPMorgan.
There is also Paul Camp, formerly the global head and managing director at JPMorgan’s transactions services division, now CFO at Circle.
A Goldman trader left his job to launch a new bitcoin exchange in Japan, trying to fill the void left by the MtGox collapse.
Dozens of other professionals from financial institutions are now playing leading roles in digital currency startups.
Interestingly, several of the financial institutions themselves have followed their former leaders into the crypto-verse. For example, Goldman Sachs is now one of Circle’s main investors. The New York Stock Exchange is now an investor in Coinbase, and began publishing a bitcoin price index. Its former CEO, Duncan Niederauer, has joined Bitcoin derivatives platform provider Tera Group as Advisory Director, and is now also an investor in smart securities startup Symbiont.
Reading between the lines, there are potentially several reasons for the moves:
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The Future of Crypto: Intimately familiar with the inner workings of banking, many have come to recognize that in several respects, the current banking system is the modern day iteration of an outdated, archaic methodology.
They are confident that digital currency will form the basis for the future, in some form or another, as numerous banks have already admitted.
Ideological: Not too many of them are crypto-anarchists, but intimately familiar with banking operations to attest that not everything has been so rosy. Then again, not everything in crypto-land has been 100% kosher, but the technology is purely innocent. It’s also a matter of the grass being greener on the other side.
Malcolm Cauchi told Finance Magnates that he spent a decade working in some of the largest online trading institutions, including Saxo Bank, ODL (now FXCM), FXDD, and most recently as COO with Sensus Capital Markets.
Yet, he departed the industry after considering how “ethical and honest” it is, especially following recent revelations of the forex rigging scandal. He has gone on to found a crypto exchange, Targo exchange, which he says was motivated by a desire to making trading more transparent.
He aims to differentiate his exchange from others by offering flexibility for traders to design their own trading pairs, among other attributes. It is geared more for acquiring cryptocurrency, and less for speculation.
He agrees that fiat is here to stay at least for now, the main role of crypto to streamline the functioning of fiat.
Others are just searching for a fresh way of doing things, and are willing to experiment with different approaches.
Cultural Considerations: For some, cryptocurrency makes money fun again. Instead of dealing with the same old, spending the bulk of your time dealing with mundane matters, the crypto-verse offers new challenges and KPIs to fulfill.
A Second Chance: In certain cases, professionals were simply not successful at what they were doing, and are now seeking a second chance in an industry still forming its identity. Here, they can apply their expertise and share their learnings from the past, making for a valuable combination with the technical experts.
For some, it’s a matter of supply and demand. The industry is still young and not yet dishing out the big bucks, and it is the only one where they will find acceptance.