This week saw many companies bail out on New York after the BitLicense took full effect, including bitcoin exchanges Kraken and BitFinex, and Bitcoin marketplace Paxful. Much more quietly, another exodus is underway. This one is of the more traditional, mainstream “money changers” on Wall Street, heading towards the freedom of decentralized currency within the Bitcoin ecosystem.
Migration from Wall Street to the Blockchain
When a person changes companies or starts a new one, it rarely makes global news, but that all changed earlier this year. When Blythe Masters left JP Morgan to begin the Bitcoin startup Digital Asset Holdings, it was a wake up call for the financial industry in the Western world, and she is not alone. This was merely the lightning rod in a thunderstorm of industry movement.
Timo Schlaefer, who has a doctorate in financial engineering, was enjoying a budding career at Goldman Sachs in London. Transferring from the Mergers and Acquisitions department to become an executive director of credit quantitative modeling, he suddenly picked up and left in February.
He left the security of Goldman Sachs to launch a company called Crypto Facilities Ltd, dealing in derivative trading within Bitcoin. What would motivate a successful executive to take such a perceived risk with his career? Certainly, getting in the ground floor of an entire industry is enticing. Schlaefer explained:
"This is uncharted territory. It's an exciting opportunity to participate in a new area of technology that has massive potential.”
Funding for Bitcoin businesses is at an all-time high, with venture capital in 2015’s first half already exceeding 2014’s totals for the entire year. Many execs are “following the money” even if it is relatively small compared to more established industries. Seemingly, some prominent people in the financial industry are noticing that Bitcoin and its ecosystem are trending upward in 2015.
This influx of talent towards digital currency certainly predates 2015. Back in 2012, when very few knew of Bitcoin or digital currency at all, Jaron Lukasiewicz, founder and CEO of the bitcoin exchange Coinsetter entered the market. Lukasiewicz left a high-paying position at The CapStreet Group in New York for Bitcoin and hasn’t looked back.
"A lot of people are entering the bitcoin space as the sector has reached an overall level of funding that's hard to ignore," said Lukasiewicz.
Bitcoin job boom
New jobs with the digital currency markets are also booming, with heavy-hitters like Capital One, Intel and Amazon posting ads within this space. In June, online Bitcoin job ads surged to a record high of 306, according to data from Wanted Analytics. TD Canada Trust and Citigroup are also joining the fray in search for more Bitcoin talent. No one wants to be left behind, and a group momentum seems to be developing.
Another Goldman Sachs refugee, Paul Chou, walked away from a top position as a quant equity trader in New York. This was after graduating from the MIT with degrees in computer science and mathematics, with every intention of becoming a part of the establishment’s way of doing business.
Now, he has also migrated and started LedgerX, an institutional trading and clearing platform for bitcoin options. He’s looking to become the first regulated exchange and clearing house to list and clear fully-collateralized, physically-settled bitcoin options for the institutional market. The opportunity to start something within Bitcoin was too big to pass up.
"I took a very large salary pay cut to do this, in return for equity in a startup that can be worth a lot someday," Chou said. “The domain expertise, relationships, and career equity I've built are things I could never have done while at Goldman. As a former trader, I'm glad I made this trade-off at the stage of my career that I did.”
Rick Henri Chan was also bitten by the Bitcoin bug in 2012. He worked for Deutsche Bank as head of OTC Derivatives Technology in Japan and was a trader at UBS and Morgan Stanley. Currently, he works for Airbitz, raising money and planning a way forward for the company. Chan had a multi-million dollar package at Deutsche, and he admits he misses the paycheck but loves the flexibility he has now.
"We're doing something special here at Airbitz. And I do think our company will be valued at a lot more in the future," said Chan.
Appetite for risk
Suffice to say Bitcoin startups are not just runaway dreams by unemployed geeks in their mother’s basement, looking for a way out. There are many raging successes, at the top of the financial industry, also looking for a way out or a better way forward. Their desire for something bigger and better than the status quo forces them to take the road less traveled, and gamble on untold success in an emerging market.
These aren’t common gamblers, but the market’s most conservative, educated, and established executives making uncommonly dynamic moves towards an uncommonly dynamic technology that just might change everything. The saying goes: life favors the bold; and these pioneers seem to be willing and capable of testing that age-old adage for many years to come.
In a very shaky financial economy, betting their careers on a new technology few truly understand or accept is bold to say the least. Let’s hope their internal beacons are as stellar as their corporate resumes.