Blockchain and Crypto, Member Exclusive

Bankchain Briefing: How crypto firm Blockdaemon is bucking the “crypto bro” trend

  • This week, we explore the current state of gender equality in the crypto industry, and what firms in the space can do to counter the long-standing “crypto bro” trend and make way for a more egalitarian future.
  • We also discuss the current state of crypto regulation in the US, and look at how the lack of regulatory clarity is impacting the growth of the industry.

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Bankchain Briefing: How crypto firm Blockdaemon is bucking the “crypto bro” trend

For years, one of the major criticisms against the crypto industry has revolved around its lack of gender diversity, both in terms of individual investors who own cryptocurrencies and the people running the biggest exchanges and other firms in the space.

A recent Fortune article points out that among the 378 crypto companies that were launched between 2012 and 2018, only 31 (around 8%) had a mix of male and female founders, while just one company had an all-women team.

Although the situation has not improved substantially in 2022, a few firms in the space have recently started taking active measures to encourage more gender and other diversity in senior leadership roles at crypto firms, as well as among the growing population of crypto investors and NFT collectors.

Blockdaemon, a prominent provider of blockchain infrastructure, is one of those firms. The company claims to have a diverse C-suite and senior leadership team, including its COO, VP of finance, VP of marketing, chief of staff, and head of people.

I spoke with Cecily Mak, Blockdaemon’s COO, to get her thoughts on the current state of gender equality in the crypto industry, and what firms in the space can do to counter the long-standing “crypto bro” trend and make way for a more egalitarian future.

Why do you think the global crypto industry has traditionally been dominated by men, and why does it continue to be even today?

Being at the intersection of tech and finance, it’s no surprise that the crypto industry similarly faces enormous opportunities to diversify the talent pools developing and executing on the Web3 vision. Unfortunately, there is a long-standing trend of more men being active individual investors than women, and this has naturally translated into crypto investing as well. We can potentially attribute this to old stereotypes, fading cultural traditions of men holding and investing family wealth, or other factors, but in truth I’m much more interested in forward-facing ways to diversify access to these new models of generating value. This trend will continue to change as a more diverse global audience gets greater access to consumer-oriented tools, education, and capital with which they can invest.

How could the lack of gender and other diversity on boards be holding crypto companies back from achieving their full potential?

I always counsel companies to comprise their boards and leadership teams with people capable of representing the customers they want to reach. If you have an all-male team building products for a 50% female user base, you are likely missing out on significant opportunities. The same goes for crypto. If executed well, crypto and Web3 generally have the potential to transform the way we move value around the planet in more equitable, efficient, and diverse ways with less reliance on middlemen and costly processes. Diverse boards will help ensure we are reaching the broadest audience and user base possible, the same way non-diverse boards result in a too-narrow focus in development, marketing, sales, and more.

Blockdaemon has been identified as one of the few crypto firms with a more egalitarian gender ratio – with three out of six female C-suite members, and similar ratios across the rest of the leadership. Did the firm take explicit steps to achieve this? And what can other firms do to get there?

We did. Inclusivity of women at all levels of the company has been a priority for us from the beginning. When I first started working at Blockdaemon almost two years ago, just under half of the total headcount was women – all of whom are still here – with promotions in each case, 250+ hires later. That same ratio now applies to the C-suite and broader leadership team across the organization. To achieve this, we have made diversity a priority with efforts that include ensuring our talent pipeline is diverse, and by building a culture that supports a broad spectrum of talent with various backgrounds, communication styles, and strengths to play up. We have also consistently made it clear with our actions, less our words, that we believe a more diverse company is a stronger and more valuable company – not to mention a better place to work that supports both the hiring and retention of our most valuable resource: our team.

Gemini’s 2022 report on the state of crypto showed that even though only 32% of crypto holders in the US were women, globally, they made up 47% of the “crypto-curious”, who said they were likely to buy crypto within the next year. Do you think the dynamics are shifting and we'll have a significantly higher percentage of female crypto owners in the near future?

Yes, crypto adoption will continue to grow beyond the early adopters (developers/finance enthusiasts) to reach a wider spectrum of people, all seeking a better way to earn, store, and invest value. This increasing adoption will raise the levels of female participation accordingly. Historical trends have shown us that early Web1 and Web2 user bases were predominantly male, with inclusion and participation becoming more diverse over time. Web3 will likely follow the same trajectory.

What does the future of the crypto industry look like when it comes to gender equality? What needs to be done, and how?

I encourage all companies in the crypto industry to lead by example and embrace diversity and inclusion across the various ecosystems, businesses, and teams.

While a lack of diversity is certainly present in the industry, we do see shifts underway as more women and minorities are finding their way into this space. And there are compounding positive impacts as we progress here. More early-stage companies are going to build more diverse teams, and as those companies scale and talent moves on, they bring similar values and cultural tendencies with them. Positive impacts being made can already be seen in industry events and investing communities. Talent is refusing to participate in conferences and other events without some demonstrated diversity, and investors expect diversity at the leadership level before writing checks.

Our success in diversifying the industry depends on persistence, patience, focus, and commitment to what we want to see. Every little bit helps, and we are all playing a role in what is certainly going to be a positive shift.

What's the current state of crypto regulation in the US?

Cryptocurrency regulation in the US is currently working under President Biden’s executive order, which focuses on six key objectives: consumer and investor protection, financial stability, illicit finance, US leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation.

Brilliant or baffling, the executive order does not prescribe specific rules or policy recommendations, but rather enlists government agencies to cooperate in driving these objectives. The unfortunate consequence of that is government agencies jockeying to be the prime regulator of the industry. This leaves the industry with the lack of regulatory clarity that we are dealing with today.

“The United States is generally the leader in global markets and liquidity. But for crypto, that’s not the case. New York is usually the leader in finance. But when it comes to digital assets, because of this regulatory situation, it’s not the case either,” says Eliora Katz, director of government relations and policy at FTX US.

Katz explains that 96% of FTX’s crypto trading happens outside of the US because of this lack of regulatory clarity over crypto markets. In addition, even though much of the intellectual capital, ideas, and innovation are created by Americans, the market activity, tax revenue, and economic benefits are taking place outside the country.

At the moment, the ongoing debate is whether cryptocurrencies should be considered securities or commodities. In his ‘Kennedy and Crypto’ speech, Gary Gensler, chairman of the US Securities and Exchange Commission, doubled down on his conviction that most of the 10,000 cryptocurrencies are securities, and should be governed by the SEC. 

The year 2022 has been marked with regulatory enforcement headlines – the most notable being the SEC v. Ripple, OFAC sanctioning decentralized protocol Tornado Cash, and the FDIC sending a cease and desist letter to five crypto companies.

In 2020, the SEC sued Ripple for allegedly conducting illegal security offering through sales of XRP, which would violate Securities Act 33. The lawsuit is still ongoing, and the outcome will set a precedent for crypto investors in the US and worldwide.

Recently, the FDIC sent a cease and desist letter to five crypto companies, including FTX US, demanding that they stop misleading users by using their logo and name. The FDIC stated that it does not offer insurance to cryptocurrency exchanges, nor does it cover cryptocurrencies. It only insures deposits held in FDIC-insured banks, and only covers the losses caused by the failure of insured institutions.

The US Treasury’s Office of Foreign Assets Control (OFAC) released a virtual currency guideline to promote understanding of and compliance with sanctions requirements and due diligence best practices. However, OFAC has come under fire from the crypto community for banning Tornado Cash, and is being sued by Coinbase, among others, for overstepping its authority.

“There’ll probably be a lot of enforcement actions for the next couple of months. I think we’ve seen that in the tea leaves of Gensler’s speech. I think also just the general market crash has reinvigorated the SEC and given them a reason now to go a lot more aggressive in this space,” said Ron Hammond, director of government relations at Blockchain Association.

Hammond reckons that we will see the US Congress making a lot of noise on the digital commodities bill, which seeks to settle the score between the SEC and CFTC once and for all. Given that Congress doesn’t have much time before the elections, he tables the decision for early next year. 

Another thing he is focusing on is the issue of stablecoins. On that front, the decision-making is up to Maxine Waters, the lead Democrat, and Patrick McHenry, the lead Republican, who must agree on regulating stablecoins. There is a lot of political pressure from regulators, industry, and Congress, and there’s bipartisan support for this. 

Finally, we will probably see a lot more scrutiny on the industry, especially when it comes to mining. The climate change agenda is a high priority for the Biden administration. Hammond expects to see a lot more aggressiveness from the administration in terms of disclosures about energy usage.

“But the one thing to take away is that Congress will be reasserting its role here and legislating on crypto now. It may not be exactly what we want. It may be exactly what the industry needs. But we’ll see that it’s gonna be very, very busy in Congress, especially starting January 2023,” he said.

Highlights from our recent coverage

Banks and lawmakers are still wary of the stablecoin bill, causing a slowdown on its road to law-ville

A potential bill that would create a regulatory framework for stablecoins is hitting some roadblocks. In this Q&A, Alma Angotti, partner and global legislative and regulatory risk leader at consulting firm Guidehouse, dives into some of the whats, whys and hows behind this story.

Marketing Briefing: The future of NFTs in loyalty programs

When it comes to brands’ loyalty and rewards programs, NFTs seem to offer a certain level of flexibility, both for the brand and the customer. Recently, Starbucks has been getting a lot of attention for its moves surrounding NFTs. Will NFTs find their home in loyalty programs?

What we're reading

  • Jack Dorsey’s TBD teams up with Circle to take US dollar-linked stablecoin savings and remittances global (CoinDesk)
  • Robinhood releases beta version of Web3 wallet to 10,000 users (CoinDesk)
  • FTX wins $1.4 billion auction for Voyager Digital assets (Finextra)
  • Interpol issues red notice for Terraform Labs co-founder Do Kwon (CoinDesk)
  • Punks, Apes, & Goblins – hi launches NFT customizable card (Finextra)
  • Wall Street bank CEOs tell Congress they’re unlikely to finance crypto miners (CoinDesk)
  • SEC guidelines disrupt banks' cryptocurrency projects (Finextra)
  • How FTX founder Sam Bankman-Fried survived the market wreckage and still expanded his empire (CNBC)
  • Crypto custody firm Fireblocks tops $100 million annual recurring revenue (PYMNTS)

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