Exclusive Interview

Tagomi: Why We Joined Facebook’s Libra Association

The New Jersey-based electronic agency prime brokerage was announced as the Libra Association's 22nd member last week.

With just two years under its belt, Tagomi is a young company–but it’s growing fast.

At press time, the New Jersey-based electronic agency prime brokerage is operational in 30 states, with offices spread across several major cities in the US and in the UK. Tagomi has formed partnerships with some major players within the space, including ICE’s Bakkt and Binance.

The last time that Finance Magnates spoke with Tagomi in November 2019, the firm was facilitating $10 million to $20 million in trades each week. However, Marc Bhargava, the company’s president and co-founder, told Finance Magnates in a call this week that “that is now $10-20 million a day.”

“So, things have been scaling,” he continued. “We’re very happy with the market share we’ve been gaining for some of the more advanced and sophisticated traders who have really been underserved, and (to date) who have either gone to these retail-based exchanges and have had to ‘cobble up’ liquidity there, or who have gone to OTC desks, where they haven’t been able to do advances algos or automated shorting.”

In addition to Tagomi’s swift upward motion in terms of its market share, the company was also announced as the 22nd member of the Libra Association, the conglomerate of companies that will act as nodes and backers for Facebooks global cryptocurrency project, “Libra.” The announcement was officially made on Friday, February 28th.

Another of the company’s co-founders, Jennifer Campbell, will act as the company’s Libra Delegate, which means that she will represent the company in decision-making meetings regarding Libra’s development. Campbell was recently named as one of Forbes’s “30 Under 30”.

Finance Magnates caught up with Marc and Jennifer to talk about Tagomi’s decision to join Libra, as well as the company’s swift upward motion as a prime brokerage in the crypto space. To hear the full interview, click the SoundCloud or YouTube links.

Big tech has made a big move into crypto

The decision to join the Libra Association also means that Tagomi is expected to contribute at least $10 million toward developing the network; that investment will eventually be eligible to earn dividends from the interest collected on money kept in the Libra Reserve. According to data from DealRoom, the total valuation of Tagomi (which has received $28 million in funding) is currently estimated to be between $48 million and $72 million.

“We’re just very excited to keep pushing our mission forward,” Marc said.

“Honestly, when we started the company two years ago, we thought that the big institutional players coming into the space would be folks like Goldman Sachs, for example; but it’s super exciting that a company like Facebook–a company with seven times the market cap of Goldman–is instead the big institution coming into the space,” Marc continued. “We have a lot of admiration also for other tech companies, like Twitter.”

He continued to say that Tagomi hadn’t predicted the entrance of big tech into the crypto space: “it’s one thing we were wrong on, to be honest, in terms of who would be the first big movers from the ‘institutional’ side–it’s turned out to be more ‘big tech’ than traditional finance. We’re just excited to be leveraging the same technology and team and regulatory stack to help folks like that, and especially to the Libra Association.”

However, Jennifer Campbell said that the decision to join the Libra Association didn’t stem out of a shift in strategy that would bring the focus onto more of these ‘big tech’ kinds of clients.

“I think that even from the beginning, our mission has always been to serve clients who are trading in size–so, folks who can’t just go to a retail platform, as Marc mentioned, and buy $10 million in Bitcoin because they need to aggregate across multiple exchanges and trade across them,” Campbell explained.

Indeed, “…Whether that’s Goldman Sachs, their clients, or larger tech companies like Facebook, our mission is still the same–to lower the execution costs for these folks,” she said.

Tagomi believes it can bring technical and legal expertise to Libra

Marc Bhargava explained that instead, Tagomi’s decision to join the Libra Association came out of a desire “to contribute wherever we can.”

“Two things that we’ve really focused on in the last two years are technology, and [the] regulatory and legal [side of the space],” he continued.

“So, Libra is so much more than just Facebook: there are 22 different members–of which Facebook certainly is one, and a driving force [at that]–but al 22 members have a common goal of basically modernizing the financial system.”

As such, all of the Association’s current members “were able to use the internet and software to–very, very quickly–touch a lot of people’s lives, and scale very rapidly. Unfortunately, we haven’t seen that same sort of scale in the financial system: we still have a billion people who have no banking, or who are underbanked.”

Indeed, “we still have billions of people who can’t move money around within their own country, or across countries.”

“And so, the mission of the broader association is to change that, in the same way, that software has sort of ‘eaten the world’ [with regards to] things like social media or listening to music or catching a car–this has not necessarily been the case in the financial system.”

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“So, at Tagomi, we’ve really focused on two things that we’ve hoped to bring to the Association: one is technology, and the second is legal [expertise].”

“Even though we’re a young company…[we’ve brought] quite a lot of experience.”

“On the technology side, for over two years (and with a team of technologists), we’ve built a lot of infrastructures. When you think about trading tokens, creating them, redeeming them, thinking about treasury; we’ve built that out, and we work with clients there,” Bhargava explained, adding that Tagomi’s platform has already been live for a year.

On the legal and regulatory side of things, “we’re operational in over 30 countries; in the US, we are registered on a national level–we have money transfer licenses (MTLs) in over 30 states, including having the BitLicense,” he said, referencing New York State’s notoriously cumbersome and expensive license for digital asset firms. “We were the 17th to get it.”

“Also in places like the UK and Hong Kong, and across the globe, we’ve been working with regulators, because we’ve been live in these 30 countries for a year,” Bhargava continued.

As such, with regards to tech and the regulatory side of the digital assets space, “even though we’re a young company…[we’ve brought] quite a lot of experience there.” Tagomi was founded in 2018.

Tagomi hopes to lend Libra its proactive approach towards regulators

On the regulatory side of things, Facebook could benefit from adopting Tagomi’s stated approach toward regulators, which seems to take a proactive angle.

This is something that Libra has struggled with in the past–David Marcus, the head of the Libra project, told the US Senate in July that “for the purposes of data and privacy protections, the Swiss Federal Data Protection and Information Commissioner (FDPIC) will be the Libra Association’s privacy regulator.” However, it was famously revealed later that day that Facebook hadn’t even contacted the regulator.

Given this kind of a past, how should Libra proceed? Jennifer said that although she wouldn’t speak on behalf of Libra, “there’s quite a lot of regulatory bodies who regulate this space, and so there’s a lot of people you have to meet: there’s the SEC, there are the MTLs, there’s FINRA,” she said.

“And so, it’s really a matter of really going to these folks and helping them understand what you’re trying to build, why it’s going to be safe, how and why people will be protected–it really takes a few ‘up-front’ meetings to help people to get to know you,” she explained. “That’s what we did with Tagomi as well…that’s why we were able to get some of these licenses so quickly.”

Marc Bhargava added that by taking this kind of approach toward regulators, Tagomi has acted as a sort of de facto intermediary: “so many of these regulators don’t necessarily talk to each other, and Tagomi, in some ways has been an ‘in-between.’”

“So, when we sat down with the Hong Kong regulator, they were super interested in ‘well, how are the UK and the US thinking about this?’,” he said. “I would say that…the biggest problem is not really regulation, from our point of view, but instead standardizing regulation.

Marc said that even in the United States, there’s still a long way to go when it comes to regulatory standardization: “we applied on a state-by-state basis to do business. Whether it’s trading or lending or [other] activities, there are different regulatory bodies within each state, and there’s not a lot of standardization there.”

As such, “over the last year…[we’ve been] really advocating for more standardization in the US, and globally as well.”

”The two things that define Libra are how early it is [in its development], and also how ambitious it is.”

Neither Marc nor Jennifer seem to be phased by the fact that a number of the Libra Association’s original members have since made the decision to leave the project, some of them citing regulatory concerns or concerns about the project’s mission.

In particular, Mastercard chief executive Ajay Banga said that his company decided to quit the project after its true motivations seemed to be unclear: “it went from this altruistic idea into their own wallet. I’m like: ‘this doesn’t sound right,” Banga told the Financial Times.

Banga specifically expressed concerns about Libra’s apparent failure to provide a practical network for “financial inclusion”: he explained that for him, financial inclusion means a government is able to pay citizens in a currency that’s easy to understand and usable in day-to-day transactions for essential items, such as food.

“If you get paid in Libra [coin] . . . which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works,” he remarked.

Libra: young and ambitious

But Marc said that it’s too soon to make judgments about whether or not Libra isn’t going to fulfill the humanitarian goals that it has laid out for itself: “I think that the two things that define Libra are how early it is [in its development], and also how ambitious it is.”

Given that the project is still in such an early stage, “none of it was a firm commitment. It was–and still is–figuring out a lot of pieces of the model: technology, regulatory, distribution; but it has a lot of the right players, I think, to succeed on a scale that we haven’t yet seen in crypto.”

“And, to be honest, there was a lot of hype around crypto in 2017, and I think that quite a few players got interested or in the space around that hype–but also, to be fair to that same group, I think that all of us would have expected more use cases to have emerged over these few years,” he said.

Of course, “we’re starting to see it, [to be] sure–whether it’s store-of-value, whether it’s payments, whether it’s DeFi–but we aren’t seeing it at scale, to date. And so, I think what’s really exciting is that you have a lot of the right players to make this happen at scale–however, it’s still very early.”

Therefore, “as [the project] figures out the specifics–the regulatory [aspects], the tech, which members are going to provide services in which ways–you’re bound to see a lot of mixing and matching.”

In other words, “I think that some of those players may not have been the right match,” Marc said. “But that also could be a timing thing–they could end up being the right match again in a year or two. So, I think it’s just really important to keep in mind how early-[stage] the project is, especially in the context of how ambitious it is.”

This is an excerpt. To hear Finance Magnates’ full interview with Marc Bhargava and Jennifer Campbell, co-founders of Tagomi, visit us on SoundCloud or YouTube. Special thanks to Jennifer, Marc, and the Tagomi team.

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