Senior executives at some of the world’s largest investment banks are ditching mainstream finance for cryptocurrency jobs, often seeking more excitement and higher rewards in a sector regulators have dubbed the “Wild West”.
Exits of traders, quants, technology specialists and bankers from traditional Wall Street or City backgrounds for crypto ventures are gaining pace, according to recruiters and professionals who have made the move, even as major players invest more in the sector.
“We’re just at the beginning — my phone rings off the hook,” said Chris Perkins, a former Citigroup executive who left in September to become president of crypto investment firm Coinfund. “I get emails and LinkedIn notes every single day from some of the smartest minds in finance thinking about how to make a similar transition,” he told Financial News.
Hong Kong-headquartered crypto trading platform Amber Group added 250 staff last year, including taking on former Goldman Sachs executive, Dimitrios Kavvathas as chief strategy officer alongside former bankers from Morgan Stanley and Royal Bank of Scotland.
Annabelle Huang, a managing partner at the firm who previously worked as an FX trader at Deutsche Bank and Nomura, told FN that Amber was continuing to hire this year across Asia, Europe and the US.
“We’re getting resumes every day from banks all over the world,” she said. “I’m personally getting a lot of phone calls from people who I used to work with. Four years ago, they were mostly asking me ‘what is wrong with you?’ and now, they’re asking me, ‘How can I be a part of it?’”
Surging Bitcoin prices in the second half of 2021 and the emergence of memecoins including dogecoin, which has been backed by Tesla billionaire Elon Musk, has helped mint new fortunes for some traders in the financial sector, such as Aziz McMahon who reportedly quit Goldman Sachs after making millions from personal bets on cryptocurrencies. It has also thrust the $2tn cryptocurrency market back into the mainstream.
Wild price swings in recent months and crypto going mainstream have attracted the attention of regulators, which have highlighted the lack of investor protection in the market, while also struggling to apply rules to rein it in.
Securities and Exchange Commission chair Gary Gensler has compared the sector to the “Wild West”, while international regulatory body the Financial Stability Board said on 16 February that cryptoassets could grow to a point where they “represent a threat to global financial stability” because of their “scale, structural vulnerabilities and interconnectedness with the traditional financial system”.
But former financiers are setting up new investment firms or joining more established crypto startups ahead of what many expect to be a tremendous expansion period for the sector.
Perkins was head of global co-head of futures, clearing and FX brokerage at Citigroup, overseeing a team of around 125 people. “I had this parallel life where I was watching this industry evolve at a breakneck pace,” he said. “The more I looked into it, I thought ‘oh my gosh, this is going to change everything’.”
Kyle Downey spent 17 years at Morgan Stanley in various senior technology roles related to its investment bank. In October, he quit to launch New York-based CloudWall Capital, a digital asset risk management system.
“The dominant narrative around crypto has shifted from it being a joke, for criminals and supporting the dark web, to a lot of people on Wall Street saying you should have 1-2% of your portfolio allocated to digital assets,” he said. “I think the bigger picture is that it is a new way to trade any asset. If you project forwards 15 years, I think all assets will be tokenised and there will be no difference between what is the stock market and what is the digital asset market.”
In 2018, as the price of bitcoin surged, there was a similar wave of bankers quitting for crypto with many predicting they could bridge the gap between digital assets and traditional finance. Meanwhile, banks including Goldman Sachs and Barclays explored the feasibility of setting up crypto trading desks, only to backtrack on plans.
Prime Factor Capital, set up by former BlackRock executives in 2018, was the first crypto hedge fund to receive Financial Conduct Authority approval but folded two years later due to a lack of institutional investor interest.
Petro Levchenko, an ex-Credit Suisse FX trader who also launched a crypto hedge fund in 2018, told FN that it seemed like an “overhyped fad” at the time.
Levchenko, who is now in the process of launching a new de-fi hedge fund with an initial $10m, said that a “broad change of attitudes from big institutions and venture capital funds towards crypto” means “businesses in this segment are now able to raise huge amounts of money at rich valuations and attract some of the best talent around”.
Hazem Shish, the former head of financial institutions group banking at Barclays in the Middle East, left in November and is now in the process of setting up a blockchain investment firm called Revam.
“Blockchain is set to become a technology that will impact everyone’s life within a decade,” he said. “I realised that I was advising on transactions with financial services companies that were centuries old, but could be significantly impacted if they did not adapt to the changes that are happening.”
Traditional financial institutions are dipping their toes into crypto. Citigroup has a new digital assets team and has plans to hire 100 people, Goldman Sachs restarted its crypto desk — offering futures tied to bitcoin and ether — while JPMorgan has been recruiting blockchain specialists and has entered the metaverse.
Meanwhile, hedge fund Brevan Howard continues to hire from banks and market makers for its new crypto-focused hedge fund, latterly bringing in HSBC’s head of flow credit, Mitesh Gupta. Galaxy Digital, the crypto investment bank started by former Goldman partner Mike Novogratz, has also taken on Blackstone executive William Burt and Goldman’s ex-chair of global markets Michael Daffey in recent months.
“The difference between this time and 2018 is that banks are following client demand, rather than anticipating it,” said Downey.
But a lot of banking professionals making the switch to crypto remain sceptical that large financial institutions will move quickly enough.
“Banks need to be wary of talent retention,” said Perkins. “The best and brightest want to move quickly and become frustrated at the pace of change at banks. Talented people leave, because they work on crypto projects, the light bulb goes on and they realise they can do more outside of a bank.”
“I think there is a lot that is going to be happening in the next two to three years,” said Downey. “I was watching the clock for the window to do something really interesting and equally looking at how the banks were attacking it and realised that it was actually going quite slowly.”
Others leaving big banks say that the industry has just become more boring. Crypto, which some believe is at the bleeding edge of technology and finance, offers new opportunities.
Arianna Luna, who worked in equity derivatives at banks including Nomura and MUFG, is in the process of launching a crypto hedge fund.
“If you start your own venture in the crypto space or join a startup, you’re moving from a stable, highly-paid job into something very insecure,” she said. “But at the same time, you’re creating something and I feel that the success of my venture depends on me and my business partners. I can control my success, but when you’re part of a big machine, you control a very small piece of the puzzle.”
“I used to trade FX markets, which was 24/5 and I thought it was pretty crazy, but now this is 24/7,” said Amber Group’s Huang. “You don’t come to crypto for the work-life balance, but you’re building something and making an impact. It is a different motivation.”
To contact the author of this story with feedback or news, email Paul Clarke