Senior Compliance Officers find it Difficult to Adapt to the Crypto Industry and Blockchain Basis
Many still remember an unusual, and to some, even a controversial move made by Jeff Horowitz in July 2018. After nearly 30 years-long careers in senior compliance roles at some of the largest banks in the US, he decided to become a chief compliance officer at the largest US-based crypto exchange, Coinbase.
The move was very surprising, considering the lack of regulations in the crypto world, and Horowitz stated on the occasion that the old-school attitude does not translate well to the crypto industry. However, he is not the first, nor the last senior compliance officer that chose to join the crypto sector in recent years. In fact. crypto-based companies went on quite a recruitment spree in order to advance in terms of regulations and attract mainstream investors in the process.
Executives such as Jeff Horowitz, who are well-known after years, or even decades in high-profile institutions make for crypto startups' favorite ‘targets.' Of course, many of the recruiters in the crypto industry claim that it is not easy to convince these executives to join the new trend, as they tend to avoid risks. Meanwhile, the nature of cryptocurrency and the sector's hostility toward regulations often discourages executives from wanting to join.
The fact that the digital currency space entered a year-long crypto winter in early 2018 did not help either. Crypto firms found it rather difficult to convince executives of the favorable future in the crypto sector while the prices are spiraling down. Meanwhile, the salaries for senior positions remain quite high, being at around $300,000 in large US companies, and around $158,000 (120,000 pounds) in the UK.
However, recruiters tend to use this to their advantage when offering executives a chance to work in an emerging industry that is developing at extremely fast rates. Even so, those who choose to join the crypto industry are more than necessary, as they carry large responsibilities. Their jobs often include things such as finding laws that might apply to new financial assets, in which jurisdictions these laws might be applied, requesting data from law enforcement, doing background checks on new clients, and more.
Obviously, these are not jobs that just about anyone can do, and checking the new clients is particularly important for the future of the companies.
Hacking Incidents Continue To Discourage
After the crypto industry went big in 2017, the sector found itself filled with money. What followed was an entire wave of hacking scandals, where numerous exchanges started reporting security breaches and thefts, which often included millions of dollars in crypto.
Issues like technology failings were also quite common, as it often tends to happen with new technologies. However, this did not make the problems any less real or damaging. Finally, allegations of crypto misuse for illegal activities such as money laundering also emerged, causing problems for the legitimate entities in the industry.
Then, in September 2018, the New York Attorney General's Office announced that a number of exchanges were putting their users and their funds at risk. The report claimed that the exchanges are vulnerable to issues such as market manipulation. Meanwhile, in the UK, the country's lawmakers called the crypto space ‘the Wild West,' stating that the exchanges need to take additional steps to protect their customers and protect themselves from hackers.
Some in the crypto industry supported the need for regulations, but they insisted that the regulatory framework needs to leave enough space for innovation and evolution of the exchanges. Others wanted to see international standards that would include the entire industry, not only the markets in certain regions.
With all that said and done, the hacking attacks still continued, among other issues. One of the problems seen as recently as in January 2019 included the $135 million that ended up frozen in the accounts owned by Quadriga, a crypto exchange headquartered in Canada. The exchange's founder suddenly died, without anyone else having access to the funds in Quadriga's accounts.
Another incident which is relatively old at this point, but still used as an example of how insecure the exchanges are includes the hack of Coincheck, headquartered in Tokyo. As mentioned, the incident is quite well remembered to this day, as it resulted in a theft of $530 million in cryptocurrency, which caused Japan's regulators to crack down on the exchanges quite strongly.
A Shift To The Smaller Industry
A series of unfortunate incidents such as the one including Coincheck and Quadriga, as well as many others in between, have shown that a new set of rules for the exchanges needs to be introduced and that it must be stricter than ever. As a result, experienced compliance professionals are more needed than ever, which can also be seen in the 230% increase in compliance-related job offers which was witnessed in the last 12 months.
The exchanges need professionals, as well as employees who can help them grow and adopt new standards which would be appealing to institutional investors. Despite the fact that institutions mostly tried to ignore the crypto industry, the interest in it is growing, and there were already cases of pension funds and asset managers approaching, albeit hesitantly and with only a fraction of their investment capital.
Meanwhile, even those executives who have decided to join the crypto industry are still unsure of it and its reputation. They require time to adapt to their new surroundings, and many of them still feel the difference every day on the job.