Ex-Goldman crypto COO says it's all about risk managers now
In a recent twitter spaces event, Kraken co-founder Jesse Powell told listeners to take their coins off any and all exchanges, including his own, when not actively trading. Powell had spoken out before on the lack of protection for consumers in this space from a legislation perspective before, but this time he spoke specifically on the lack of security and risk management at FTX
Powell explained that from the perspective of a crypto exchange, customer balances are a liability. If a centralized institution asks you to deposit coins on an exchange, beware.
With Genesis also on the brink of bankruptcy, it's becoming apparent that crypto exchanges have a risk management issue. How do companies plan on fixing this?
Prometheum, a regulated crypto alternative trading system believes it has the answer. Last month, it launched the first SEC regulated market for digital asset securities and brought in the former Goldman Sachs head of electronic trading risk, Anoop Datta, as their COO.
In the short term, Datta tells us that “the unfortunate reality of decreased volumes and increased volatility” is inevitable, but “as the dust settles, customers and regulators will see the need for more regulation and framework.” He also says that once they are able to “establish fair and orderly markets, we can see a return to if not increased volumes in the future.”
Prometheum aim to capitalize on this demand for fair and orderly markets with PrometheumATS. By classifying digital assets as securities and adhering to federal security laws, their platform should be significantly safer for traders. - For example, in the event of a bankruptcy, it will offer the segregation of Prometheum ATS customer funds and securities custodied at Prometheum Capital, upon Special Purpose Broker-Dealer approval.
Datta is one of the bigger names in risk management to enter crypto, but he won’t be the last. He says that “the greater the adoption of these frameworks, the greater the need for risk functions.”
Kyle Downey, a former Morgan Stanley managing director who now runs Cloudwall, which produces a digital asset risk platform, agrees that we're on the cusp of a new era of risk management in crypto. "The survivors will be the ones who made good investments in risk management and that this will drive further interest," he says. "The crisis is not over -- but once clear people will be asking about what they need to invest in to better protect themselves next time."
Downey says most of the risk managers in crypto come from traditional finance. But why would a comfortable risk manager at a big bank join a crypto exchange now? It “comes down to one's philosophical outlook” says Datta. Candidates must be “willing to be pioneers.”
Have a confidential story, tip, or comment you’d like to share? Contact: email@example.com in the first instance.
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)
Photo credit: eFinancialCareers/Midjourney