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The Knock-on Effect of the Crypto Industry Nicking Top Talent From TradFi

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Australia’s crypto industry is deepening its backbench of former regulators and investment bankers, and exchange managers say their arrival could strengthen an in-flow of institutional investment and support. 

Leigh Travers, chief executive at Binance Australia, said that where once a regulator would look to see out the rest of their career in commercial life at a bank, now they’re turning to crypto. 

“So you have these individuals, typically financial institution executives, who are now able to speak to former colleagues with the same language, the same sort of trust, because they’ve worked with them previously,” Travers said. 

“They can now explain that, ‘Hey, the risks that you’re concerned about, I was too previously, and now I’ve managed those, and the firm I’m working with has managed those risks, and I’m comfortable presenting this product to you,’” he said. 

And it’s not just former bankers who are turning to crypto in droves. Binance Australia alone welcomed various former regulators to its compliance team both globally and in the US. 

In October 2021, the exchange appointed Mark McGuinness, a former adviser to the ASIC chair, as its new chief regulatory liaison officer. Two months earlier, the exchange announced it had appointed Greg Monahan, a former criminal investigator at US Treasury, as its new global money laundering reporting officer. 

Travers said it should emerge as a vivid “trust marker” and settle some of the concerns the industry’s critics have about lacking oversight or perceived security risks. 

“If your main concern around [crypto] is that the industry isn’t regulated, or you don’t have familiarity, or don’t trust it yet, seeing regulators move into the industry and work for digital currency exchanges directly has to be a trust marker for you,” he said. 

It’s a sentiment shared by Adrian Przelozny, CEO at one of Australia’s biggest exchanges, Independent Reserve, which also has significant investor interest in Singapore, where the exchange has been overwhelmed by institutional interest following the implementation of a new regulatory framework. 

He said that the arrival of former financial services professionals in the crypto industry is on an “exponential” upward trend at the exchange, and that they could be key to securing institutional investment.

“I think people tend to trust others who are like them,” Przelozny said. 

“Bringing one of these guys into a meeting with a bank, the conversation kind of changes a little bit because the people on the other side of the table can see another person who has an experience not too different to their own,” he said. 

“And it can really help change the views and maybe their preconceived ideas of what they thought about the cryptocurrency industry; that it’s not the wild, wild west.”

Institutional investors in Australia have developed a steady appetite for crypto exposure, with most already invested, to varying degrees, themselves personally, and a teeming presence of former regulators and investment bankers could soften institutional entry into the space. 

Lasanka Perera, chief operating officer at Independent Reserve, said that he hopes to see superannuation funds among the earliest adopters. 

“There is huge resistance, but I think it’ll happen sooner rather than later,” he said.

“So, it might seem to us like it may take five or 10 years for super funds to allow their investors to get crypto exposure,” he said. “But I think if one goes, then all of a sudden you see a few others get into it.”

The exchange said that, while large companies in Australia may be hesitant, low-level institutional investment has seen marked growth throughout 2021.

According to Independent Reserve, SMSFs alone have already traded $557 million through the 2021 calendar year, up 355% from the year before. The platform said that financial advisers have also recorded a noteworthy uptick in investment.

Jonathon Miller, managing director at Kraken Australia, said that the financial services industry is now caught in a game of catch-up, and could soon have no choice but to embrace crypto assets. 

“I mean, crypto is becoming the kind of locus of attention from lots of industries, including the financial sector, because it’s competing with it,” Miller said. 

“There has been… an undue, antagonistic relationship between the existing banks, who are too risk-averse, to be honest.”

As with Binance and Independent Reserve, Miller said Kraken has also reaped the benefits of more forward-thinking bankers stifled by the corporate structures of Australia’s banking sector, who have turned to crypto instead.

“Those people are native to the business model that we run, and we hire them because they have the right skills. Whether or not a bank finds that attractive is something I can’t comment on,” he said. 

“[But] I do think that it is true that the regulatory [and] the virtual environment [for crypto in Australia] is going to change over the next 12 months. And I think as far as people who are equipped and capable of understanding crypto regulation, there’s actually not that many people who understand both. 

“It’s going to be a fascinating 12 months.”