As Crypto Winter Lingers, Digital Custodians Fill Senior Posts
Strategic moves by trust companies, Nasdaq and others prioritize safety of assets and institutional participation
Friday, October 7, 2022
By Jeffrey Kutler
The job cuts ascribed to the downturn known as crypto winter have spread to some of the cryptocurrency industry’s most high-profile and at times polarizing personalities. Among those resigning: Chief executive officers Alex Mashinsky of Celsius, which filed for bankruptcy in July; and Jesse Powell of Kraken, who faced internal unrest and a reported investigation into alleged sanctions violations.
Sam Bankman-Fried, CEO of FTX Group, is not as embattled as counterparts Changpeng Zhao of Binance, the biggest global crypto exchange operator, who has had run-ins with regulators; and Brian Armstrong of Coinbase, No. 1 in the U.S., who is dealing with a depressed share price and reputational damage. But Sam Trabucco has stepped aside as co-CEO of Bankman-Fried’s Alameda Research venture, and Brett Harrison of FTX US, the No. 2 U.S. exchange, has transitioned from president into an advisory role.
By contrast, if newly announced initiatives and senior-level hires are any indication, the field of digital-asset custody is booming. In this emerging-growth segment of the crypto ecosystem, for instance, Protego Trust Bank, which is building out a dedicated institutional asset-servicing business, recently hired Ron Totaro as CEO; and Tim Neill joined crypto infrastructure innovator Copper.co as chief risk officer. NYDIG (New York Digital Infrastructure Group) reported sizable revenue growth as it named a new CEO and president.
In addition, strategic moves by incumbent players like Nasdaq, Nomura Holdings and Northern Trust Corp., with associated executive appointments, highlight the attention being paid to digital-asset safety and security even as questions swirl around the prospects of investments in specific products like bitcoin.
“The technology that underpins the digital-asset ecosystem has the potential to transform markets over the long term,” said Adena Friedman, president and CEO of Nasdaq, which has put Ira Auerbach, formerly global head of Gemini Prime, in charge of a new business unit to deliver “a proprietary custody solution with liquidity and execution services for financial institutions.” The focus, Friedman explained, “will be to provide institutional-grade solutions that bring greater liquidity, integrity, and transparency to support the evolution.”
Meanwhile, crypto-native companies are bulking up on the institutional side. Nick Carmi, who was global head of fixed income, currencies and commodities at Tower Research Capital before becoming head of financial services at crypto wallet and custody pioneer BitGo in 2019, is now Circle Internet Financial’s vice president of institutional markets.
When Circle in March selected BNY Mellon as a primary custodian for its USDC stablecoin reserves, the bank’s CEO of asset servicing and head of digital Roman Regelman put it in strategic context: “We are at a point in the evolution of our industry where the digitization of assets is presenting new and exciting opportunities to a broad range of market participants . . . Our role as a custodian for USDC reserves supports the broader marketplace and brings value to clients, founded on our role at the intersection of trust and innovation.”
Another sign of the recognition and desirability of custody as a digital-asset linchpin was a presentation to Celsius employees, before Mashinsky’s September resignation, described by the New York Times as “an audacious plan to revive the firm” with custody as a centerpiece. Mashinsky and chief compliance officer Oren Blonstein “focused on the possibility of storing crypto assets for Celsius’s users. Mr. Mashinsky said he could imagine charging customers a fee for access to a special, highly secure crypto wallet,” the report said.
Payments and Blockchain Background
Protego Trust Bank of Seattle, Washington, obtained conditional approval in February 2021 from the Office of the Comptroller of the Currency to convert from its state charter into a national trust bank. Ron Totaro, named CEO in September, had been president of blockchain technology and payments company Tassat for two years. He was previously with ACI Worldwide, FICO, GE Capital and American Express.
Protego Holdings Corp. founder and CEO Greg Gilman said Totaro “brings a solid understanding of digital asset and blockchain technology as well as strong relationships with banking and private equity leaders,” and will be working “to finalize the OCC approval process and launch our much-needed bank platform for institutional investors to securely custody, trade, lend and issue digital assets including cryptocurrencies.”
“Current market dynamics in cryptocurrencies and digital assets reinforce the need for institutional investors to have a trusted partner that shares their values, processes and desired outcomes,” Totaro said. “I’m looking forward to working alongside our expert team to deliver a full spectrum of digital asset services as a federally chartered trust bank.”
Protego added to its board earlier this year former acting Comptroller of the Currency Brian Brooks and retired Ally Financial CEO Michael Carpenter. It also named new advisory board members including fintech investor and former SunGard chief executive Cris Conde; former State Street Corp. chairman and CEO Jay Hooley; and Kelly Mathieson, chief client experience officer at Digital Asset Holdings, who earlier in her career was global head of custody product and global head of securities clearing and collateral management during 26 years with J.P. Morgan.
“Critical Time for Risk and Compliance”
Copper.co, whose integrated infrastructure encompasses trading, storage, and margin lending and DeFi (decentralized finance) access, posted its announcement of Tim Neill as CRO on September 5. He has 20 years of risk management and operations experience with the likes of London Stock Exchange Group, Standard Chartered and Deutsche Bank, and was most recently at Mastercard as CRO of the new payments platforms division and head of risk for product and engineering, covering new payments platforms, digital banking and central bank digital currencies (CBDCs).
He said in a statement that Copper has set “high industry standards for safety and security in the digital asset space. At such a critical time for risk and compliance in the crypto-asset ecosystem, I look forward to applying my digital finance security management experience to help ensure institutional investors and asset managers can continue to transact and store cryptocurrencies transparently and securely.”
Neill reports to chief operating officer Sabrina Wilson, who said that he “brings a wealth of experience in managing enterprise risk within large-scale global financial services institutions. Prudential risk management is an essential pillar of Copper strategy, and we look forward to working closely with Tim in his chief risk officer capacity.”
Wilson is former global co-head of the Futures, OTC Clearing and FX Prime Brokerage business at Citi, and has held senior positions at J.P. Morgan, Goldman Sachs and Deutsche Bank. She is on the board of trading systems company TS Imagine.
Digital Assets is one of two “growth pillars” – the other is Carbon Markets – within Market Platforms, one of the three divisions comprising Nasdaq’s new corporate structure, announced on September 28.
“Market Platforms will be at the forefront of the financial system’s evolution and will play a critical role in advancing the modernization of markets,” Nasdaq said. “Innovative technologies, including cloud and blockchain, present significant potential opportunities to further enhance market resiliency and scalability, make markets even more accessible to market participants, and open doors to new asset classes.”
Effective January 1, the Market Platforms president will be Tal Cohen, currently executive vice president and head of North American Markets. The other designated division presidents are Nelson Griggs of Capital Access Platforms and Jamie King of Anti-Financial Crime.
Nasdaq said on September 21 that pending regulatory approvals, “Nasdaq Digital Assets will initially develop an advanced custody solution that will incorporate liquidity and execution services to address industry challenges around connectivity, availability and efficiency. Nasdaq’s custody solution will bring together the best attributes of hot and cold crypto wallets through an innovative technology offering, which will provide a high degree of accessibility and scalability without compromising security.”
CEO Adena Friedman said the strategy “builds upon the successful solutions we have introduced in recent years to serve the digital assets ecosystem, including marketplace technology for digital asset exchanges, crypto-native anti-financial crime offerings, and crypto-related index solutions for tradable products.”
Digital Assets head Ira Auerbach, a senior vice president, “will oversee the team’s strategic roadmap, growth targets, and product development,” Nasdaq said. He is reporting to Tal Cohen, who commented that “Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth” as institutional demand picks up. “With our trusted brand and strong track record as a technology provider for the global capital markets, Nasdaq is uniquely placed to address industry pain points by improving liquidity, scalability and resiliency, with the goal to engender greater trust and confidence in the digital assets ecosystem.”
With more than 20 years of experience in market infrastructure and digital assets, Bertrand spent over a decade at Borsa Italiana and the London Stock Exchange while being an ambassador at the Global Blockchain Business Council.
“Blockchain technology has become the underlying infrastructure of the global technology revolution powering the disruptive potential of digital assets,” Bertrand said. “As the industry continues to mature and attract additional institutional participants, the need for regulated, trustworthy and independent digital asset custody services will only grow.”
Also appointed at Komainu in September was Sebastian Widmann as head of strategy, after serving as vice president of Nomura’s wholesale digital office.
Jezri Mohideen, CEO of Laser Digital, noted, “Whilst the digital asset ecosystem has been impacted by the global macro environment, institutional adoption is continuing to accelerate, presenting significant opportunities for Komainu.”
Alongside Mohideen, senior London-based Nomura banker Steven Ashley is now chairman of Laser Digital. It has mapped out “three core areas” – secondary trading, venture capital and investor products – and said Laser Venture Capital will be first to launch, investing in “companies in the digital ecosystem, with a focus on decentralized finance (DeFi), centralized finance (CeFi), web3 and blockchain infrastructure.”
New Management Role
Northern Trust of Chicago, which in June announced the formation of its Digital Assets and Financial Markets group, created what it termed a new leadership role with the September appointment of Michael Buzza as head of network management and market strategy.
Over 16 years with Northern Trust, Buzza had led strategic agent bank provider selection and was instrumental in the bank’s strategic investment in Zodia, an institutional-grade digital custodian launched in conjunction with Standard Chartered.
“Michael’s role will be key to the ongoing management of our market-facing relationships across both traditional and digital markets,” said Justin Chapman, global head of Digital Assets and Financial Markets. “His wealth of experience across risk management, commercial partnerships and financial markets will also accelerate the development of our traditional and digital asset capability roadmaps.”
After 15 years with IHS Markit, where he led regional teams across Asia-Pacific, Akeroyd has a global and large-customer remit and is based in Asia to provide local leadership across the region. Rooz called him “a great addition to Digital Asset’s executive committee. Shane’s industry expertise, combined with his proven track record and results-oriented leadership style, is the perfect fit to support the company’s ambitious growth objectives and the increasing demand we are seeing from customers.”
Prior to IHS Markit, Akeroyd worked in senior positions at RBC Capital Markets, TD Securities and Bear Stearns after starting his career at Bank of America.
“There is a large addressable market for Digital Asset and phenomenal tailwinds it can leverage as industries look to embrace web3, distributed ledger, blockchain and tokenization solutions,” Akeroyd said. “Digital Asset is at the forefront of this change, leading marquee projects in capital markets with a great product, great leadership and an impressive and growing list of stakeholders and customers.”
NYDIG, which has partnered with depository institutions and technology vendors to execute a “bitcoin for all” strategy, serves the mining business and touts a “best-in-class cold storage custody solution,” announced leadership changes on October 3, at the same time reporting all-time highs in bitcoin balances and a 130% year-over-year rise in revenue.
Tejas Shah and Nate Conrad were promoted to CEO and president, respectively. They replace CEO Robert Gutmann and president Yan Zhao, who remain at NYDIG’s hedge-fund-firm parent, Stone Ridge Holdings Group, of which they are co-founders. Gutmann also remains on the board of NYDIG, which in a December 2021 funding round was valued at $7 billion.
Shah was most recently NYDIG’s global head of institutional finance, Conrad global head of payments. Shah joined in 2020 after nearly 20 years at Goldman Sachs. Conrad, also formerly of Goldman Sachs, joined Stone Ridge in 2016 and NYDIG in 2020.
Stone Ridge founder and CEO Ross Stevens, another Goldman alum, who founded NYDIG in 2017 and is its executive chairman, said in a statement: “When markets crumble, character emerges. A flight to quality from the most risk-aware institutional investors has relentlessly driven bitcoin, and revenue, to NYDIG the last 12 months. Even during the height of the crypto frenzy in H2 2021, our risk management discipline kept us entirely away from DeFi, centralized lending platforms, and the uncollateralized lending market. The firm’s balance sheet is the strongest it's ever been, and we’re now investing aggressively into a capital-starved market.”