When we announced that we were going to capitalize a bank, some called us crazy. Their responses sounded something like this:
“Why would you go from a VC in Latin America focussed on fintech and crypto to the slow and overly regulated world of banking?”
In our mind it was clear: the world of crypto and fintechs needed to combine with banking … and banking would benefit from crypto and fintech in kind. Already the lines that define a bank get more and more blurred by the day as companies seek to offer some of the services traditionally within banking to consumers and this trend is, if anything, accelerating.
However, their objections and concerns weren’t wrong. The process to become involved in banking is onerous to say the least. The layers of protections in place when it comes to dealing with other people’s money is extreme, intrusive and dare we say, warranted.
For those that don’t know, any significantly interested banking party is vetted, board members must have relevant experience and the regulators are constantly monitoring and watching pretty much everything a bank does. The process to go from interested to bank owner can take years and millions of dollars.
So why would we seek to put ourselves through this? Doe the return warrant the effort? Simply put, yes and the events of this month reiterated this to us.
FTX was one of the crown jewels of the crypto industry and yet today it sits in a whos who list that includes 3 arrows, luna and celsius. Companies by and large run by smart individuals just looking to make a difference. Yet billions of dollars of value has dissapeared, along with 100’s of millions of dollars of consumer deposits.
If there was ever a better argument for regulation, I don’t know what it could be.
Like it or not, agree or disagree, millions of people have decided to ascribe value to digital assets. In doing so, the management, exchange, storage and reporting (amongst others) of these assets MUST be subject to regulation and consumers have a right to expect those that hold their wealth to operate next to a set of rules that have been battle tested and refined over years.
Being smart isn’t enough … being a good guy doesn’t cut it. A responsible industry accepts oversight and welcomes the decades of learning that underpins the regulatory rails that limit what you can and can’t do.
Peter Swain, CEO A3 Finance
What we thought would take 3 to 5 years is becoming closer by the day. For crypto to have a future there are only 2 options: Bring the right regulation into place OR limit activities in the crypto space to existing regulated bodies … such as banks. By 2025 we see the majority of crypto buy / sell action occuring through the banks.
Its not a good time for the crypto industry and it gets harder by the day to justify to the non crypto crowd whats happening here. That being said, Lehman’s collapse in 2008 shone a spotlight on what was wrong and led to new regulation to stop similar occurences in the future. In essence the collapse of Lehman didn’t become “finance is dead”, but more “for finance to thrive it has to look different”.
We’ve spent the last 6 months working with regulators and their desire to provide clarity and regulation has become more clear by the day. The debacle around FTX can only accelerate that for the good of all of us.
