Welcome to Slate Sundays, CryptoSlate’s new weekly function showcasing in-depth interviews, professional evaluation, and thought-provoking op-eds that transcend the headlines to discover the concepts and voices shaping the way forward for crypto.
Not like the Coinbases, Fidelities, and Galaxies of the crypto world that ceaselessly make the headlines, core infrastructure suppliers quietly constructing out the rails of the brand new monetary system typically fly below the radar. A number one digital asset expertise supplier for establishments backed by the likes of Andreessen Horowitz, Coinbase Ventures, BNY, and Wells Fargo, within the final 12 months, the corporate has onboarded main asset managers answerable for a mixed $18 trillion in AUM.
As Samar Sen, SVP Head of APAC at Talos, tells me this statistic, my eyes widen. “These are some of the largest and most reputable asset managers in the world,” he smiles. Eloquent and poised regardless of being recent off the airplane from Singapore, I meet a pleasant and well mannered Samar within the bustling media room at TOKEN2049 in Dubai, accompanied by his equally charming advertising lead, Audrey.
We alternate nice chatter, and so they ask how lengthy I’ve lived in Dubai and what introduced me to this a part of the world earlier than extending an open invitation to go to their workplace in Singapore. Moreover discussing the way forward for finance, the true attraction there, Audrey explains as she pads down her swimsuit, is a “magic mirror” hanging on the wall that makes you look elongated and several other kilos lighter.
“I could use a magic mirror,” I say. “Count me in!” Audrey and Samar chortle. “I miss my magic mirror,” she sighs, as we stroll towards the seating space and I pull out my recorder.
The inefficiency of TradFi’s legacy tech stacks
Samar’s background is spectacular, having clocked hours at most of the largest TradFi establishments, from Goldman Sachs and Barclays to BNP Paribas and Deutsche Financial institution. However whereas he labored in what he calls “the inner bowels of the banks,” Samar has at all times been extra drawn to bleeding-edge innovation.
“I was a computer scientist,” he says. “I started my career building trading systems at Goldman in the early 2000s. In the early days of connecting financial markets, it was a really exciting job because they were electronifying and opening up all kinds of asset classes.”
He climbed the company ladder to his final publish as World Head of Digital Merchandise at Deutsche Financial institution, constructing out the financial institution’s digital asset technique earlier than diving into crypto. Samar quickly realized the transformative nature of blockchain expertise and its potential to disrupt conventional finance.
“Only people who really work on the inside of banking can understand how inefficient some of the tech stacks are,” he confides. I interject pretty shortly, saying, “I think we all understand how inefficient they are.” He concedes that I in all probability do, since I write about it for a residing, however the common individual is unaware, will get pissed off, and wonders why it’s so costly and the expertise is so poor.
“They don’t realize that the rails are old and a lot of the old mainframes that run this are not being upgraded. So, when a transformative technology comes along, it solves many problems in finance. Whether it’s the transfer of money like in global remittances or creating new investor products across many different types of assets.”
Samar didn’t need to miss out on the “wave of learning” within the crypto area, so he determined to take a front-row seat within the motion and settle for a place at Talos.
“I realized that the banks would take a long time to come to market because of the required regulations, tech investments, and internal compliance upskilling, and there was so much fast-growing innovation in digital assets.”
Talking ‘both sides’, bridging TradFi and crypto
Becoming a member of crypto on the finish of 2021 was an thrilling time with establishments (and their clients) frothing on the mouth to commerce its thrilling markets. Many limitations nonetheless stood of their means, and gaping voids wider than the Darien Hole existed between TradFi and crypto corporations. They didn’t converse “the same language,” and conventional corporations coming into digital property missed the skilled buying and selling instruments they have been accustomed to in foreign exchange and equities.
“I joined a firm that I knew would provide a service that institutions would need if they were going to come in a big way,” Samar explains.
Being so well-versed in TradFi and the rising crypto ecosystem, Samar was uniquely positioned to bridge the hole between the TradFi fits and the scrappy, crypto-native merchants.
“I could speak to both sides at that point because I’d researched the crypto ecosystem for Deutsche. At the same time, I knew what traditional finance needed in terms of professional-grade equipment and tech stacks. For me, it was an easy switch. I saw a gap where I could bring some value.”
Is he glad he did? He nods with out hesitation.
“I get to work with very smart computer scientists and quantitative traders, and partner with a lot of traditional firms that are excited about this asset class. They want to work with digital assets, and being a person that helps guide them into that asset class is a role that I’m really enjoying.”
The turning tide, from ‘tulips’ to secure haven
Banks weren’t at all times in such a rush to work with crypto, I level out. The nice TradFi thaw was as soon as a permafrost. Jamie Dimon in contrast Bitcoin to tulips. Christine Lagarde smirked over it being “worth nothing,” and Warren Buffett branded Bitcoin as “rat poison squared.”
“Yeah, obviously,” he agrees. “At the beginning, there was a lot of friction. Nobody wanted to work with crypto.”
Samar believes the worth proposition wasn’t apparent to institutional buyers originally, after which the occasions that lambasted the business, from China bans and North Korean hackers to Terra/LUNA and FTX, held it again a number of years.
“For me, even though there have been ups and downs in crypto, the industry gets more and more resilient. FTX was a setback, but every time the industry fixes its problems, it comes back stronger, more mature, and more regulatory-friendly.
Crypto falls into many different categories. You have speculation, but you also have mature asset classes like Bitcoin, the promise of real-world asset tokenization, and the utility of stablecoins. There are a lot of use cases now that people get very clearly, and many of our clients, especially on the buy side, large asset managers and hedge funds, know now that they need to have a small allocation in their portfolio to Bitcoin or some other digital assets.”
They will’t use their outdated tech to work on crypto
On the purchase facet, when establishments attain that time and need to begin buying and selling or holding sure kinds of crypto, they arrive up in opposition to a number of limitations, Samar explains, the primary of which is a scarcity of uniformity throughout the board.
“Hedge funds or asset managers have a problem initially with connectivity, where there are no technical communication standards. You have a challenge with how you speak to the market, whether it’s the exchanges or the OTC desks and market makers.”
Skilled, institutional-grade instruments akin to execution administration, portfolio and danger administration, and treasury programs are the subsequent facilitators they search.
“When you are a large firm trading $10 million worth of Bitcoin at a time, you can’t go on to a retail exchange and drop that order. You need sophisticated tools to let you work that order so the price doesn’t move against you. We have those algorithmic execution tools that firms recognize, and with one API to us, they can talk to the entire market.”
Talos holds establishments’ fingers, from value discovery to execution and settlement, serving to them navigate this ecosystem and speak to the completely different gamers concerned.
“How do you work with the custodians? How do you settle? How do you risk manage these assets? We provide tools around that. This is why we are a bridge because we give a familiar toolkit to the investors, and when they talk to us via API, they can talk to the rest of the market in a way that they’re familiar with.”
On the promote facet, present banks, brokers, e-trading platforms, and funding apps can provide crypto buying and selling to their clients by means of Talos’ white label answer, enabling them to go to market sooner with out changing their present tech stack.
“All these sell-side providers are now realizing that they need to offer this asset class to their customers, and they realize they have to build a lot of new tech. They can’t use their old tech to work on crypto. So, they need this tech stack that lets them connect to the market, get a low price, and then add the margin for their customers.”
“Some of the largest banks and brokers in the world, as well as some of the largest e-trading investment platforms and custodians, are using our tech to offer their customers the ability to invest in digital assets. And no one knows they’re using our tech. We’re happy to be a silent partner.”
Talos’ pipelines are greater than ever
I ask Samar how he sees institutional adoption on this a part of the world in comparison with the U.S. and elsewhere. He replies:
“The regions differ for varying reasons. On the regulatory side, some financial hubs are at a more mature stage in their pathway to crypto licensing. In the early days, Switzerland and Japan were leaders, but now you have MiCA in Europe, Singapore and Hong Kong are very strong hubs for crypto, and you have the UAE (Dubai and Abu Dhabi), which have attracted a lot of companies.”
He says the U.S. has been a “laggard” for a very long time as a result of the SEC was going after corporations with its regulation-by-enforcement method. The change of administration, he says, has caused a step change for the business, and he can’t wait to see how issues unfold.
“The world is very excited to see what’s going to happen in the U.S. Many markets follow the U.S. If they say something is okay, they’re going to legitimize it.”
Past regulation, he argues that cultural variations play an necessary position in institutional adoption. He explains that the fintech-friendly Asians skipped financial institution accounts and went straight to e-banking and immediate funds. “They’re very comfortable with crypto and taking risks,” he says.
“In Asia, many investors are comfortable with leverage, comfortable with derivatives, but it’s more about risk-taking. You have a lot of new wealth creation there. When they invest, they don’t want 3% or 4%. They want 8% or 9%. You get that with leverage or more risk-adjusted investments; in Europe, investors are more conservative and it’s often more about wealth preservation. You don’t see structured products as popular there.”
Samar is inspired by the appearance of MiCA and appears ahead to seeing development in Europe, the place Talos has many purchasers. Nonetheless, he says the true one to observe is the USA.
“What we’re waiting to see is the sleeping giant of the U.S. In the early days, it was mainly only crypto funds that were our clients. Now, we’re seeing large asset managers we’ve onboarded, responsible for a combined AUM of around $18 trillion. You can only imagine those names. They are some of the largest asset managers in the world.”
Is he involved about geopolitical forces, like a commerce struggle, kinetic struggle, or menace of an impending recession taking the wind out of crypto’s gross sales? He pauses for a second, then says:
“There’s some market uncertainty globally. But none of the crypto heads of divisions or digital asset heads at the banks or asset managers have stopped. They are still onboarding with us. Our pipelines are bigger than they’ve ever been, and our trading volumes are in the billions [USD] per day.”
“The mission at Talos is not about how much money we can make in this current crypto cycle. The thesis is that this technology is transformative and here to stay, and all the banks and investors realize this, so we have built a sustainable business for the long term.”
This looks as if a very good place to finish. As we wrap up the interview and say our goodbyes, Audrey invitations me to go to them once more, reminding me of the perks of their magic mirror. I smile. Going about your day trying taller and thinner wouldn’t be so unhealthy as you steadily welcome the outdated guard to the brand new world of crypto.
As legacy finance embraces the brand new frontier with the assistance of a magic mirror, Talos stays a silent power behind the scenes, quietly accelerating institutional crypto adoption, one asset supervisor at a time.
