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Crypto Custody Gets Shot in the Arm from Goldman & Anchorage

The institutional push into crypto continues to accelerate with Goldman’s RFI and Anchorage’s conditional approval.

January 20, 2021 By Todd Anderson Leave a Comment

Last year will be known for a myriad of events. While the institutionalization of crypto might not make it to the top of the list, it was among the biggest trends in financial services. The news that Goldman Sachs is entering the crypto custody market helps to push that trend even further.

Perhaps the biggest news involved Anchorage, who secured conditional approval for a national trust charter from the U.S. Office of the Comptroller of the Currency (OCC), making it the first national “digital asset bank” in the U.S.

The crypto markets in general have long been dominated by retail investors, even today retail accounts for 91 percent of crypto asset investments according to Singapore-based SC Ventures. Institutions have been quickly catching up, even the likes of JPMorgan Chase and Goldman Sachs have changed their tune.

Goldman Sachs has held multiple public positions on crypto over the years, it wasn’t that long ago they were rumored to be creating a crypto trading desk. The news from earlier this week is the clearest indication yet that the bank will be getting more involved in the space as they are rumored to reveal their plans soon.

According to reports Goldman Sachs issued a request for information (RFI) to explore digital asset custody, as part of a broader digital strategy.

Goldman is not the only large scale bank getting involved in the crypto custody business. CoinDesk reported in early December that Northern Trust and Standard Chartered’s fintech investment unit, SC Ventures, were launching Zodia Custody in the UK. JPMorgan Chase and Citi are also said to have expressed interest in the custody space.

The larger trend is the more interesting one to watch. It begs the question: is the traditional financial system finally coming to the realization that crypto is here to stay? In short, yes. Though there are a lot of questions that still need to be answered before crypto is seen as an everyday part of our financial lives.

Regulation is still very near the top of the list. There is no global consensus on crypto regulation and a new administration in the U.S. will mean changes to current regulatory thinking. Banks like Goldman, JPMorgan, Northern Trust and others should push to lead the way. Their acceptance, holding and trading of the assets, will help to push regulatory bodies to a more innovative path.

It is hard to see the digital asset momentum being stopped but crafting a safe pathway into the global financial system will certainly help to ensure long term success.

Citi and Yieldstreet, the Bank Partnership No One Saw Coming

The newly announced bank partnership will give Yieldstreet investors access to private credit investments from Citi.

January 16, 2020 By Ryan Lichtenwald 1 Comment

There have been no shortage of bank partnerships in fintech, but this might be the most unique. Last week we learned that Yieldstreet, an online platform which offers investors access to alternative investments was partnering with Citigroup to offer investors access to their private credit investments. What is most intriguing about this announcement is that a big bank is opening up investment opportunities which were traditionally funded by institutional investors and hedge funds. I spoke with Milind Mehere, the CEO and Founder of Yieldstreet to dig deeper into this partnership.

One of the challenges Yieldstreet has faced is keeping investment opportunities available for investors. They currently have 300,000 accredited investors on the platform, but for over 2 years the demand has been insatiable. Most investment offerings fill up within minutes, if not seconds, creating disappointment in investors who miss out. Mehere’s ultimate goal is to continue to create homogenous and repeatable distribution channels. In order to access good supply Yieldstreet is always looking at interesting investment opportunities and the Citi deal is the latest example of that. It will bring $2 billion of assets to investors.

Yieldstreet currently advertises investment opportunities across real estate, litigation finance, marine, commercial, art and more. You can view some of their past offerings here. The deal with Citi will bring similar assets and may include other areas such as energy and infrastructure, railroad contracts, toll booths and even cell phone towers. These deals will be slightly longer in duration, providing steady cash flow over a longer period of time on assets that tend to be uncorrelated to the stock market. Speaking of long term investing, it is worth mentioning Yieldstreet’s acquisition in December 2019 of WealthFlex which will bring these investments into retirement vehicles. This is something that will be welcome news to investors given the high yielding nature of these investments.

The way Mehere views Yieldstreet overall is for investors to have access to a broad spectrum of investments ranging up to around 12%. The mandate with Citi will focus on paper which is either in the 5-6%+ range or around 10-12%. Investors can expect the first deals to hit the platform in the next few weeks.

Yieldstreet investors can expect a similar experience when participating in the deals sourced from Citi and the investment opportunities will be marked as coming from Citi. While Yieldstreet is focused on expanding the number of offerings, they ultimately have the ability to accept or reject offerings. Mehere views their platform as a way to target investment opportunities which offer attractive returns. This means that the current asset classes aren’t necessarily the ones you will see in a year. One way for investors to achieve higher yields is due to inefficiency of capital and perceived versus actual risk. Yieldstreet wants to focus on investments which make sense, opportunities that are not overpriced and that are in areas where they have expertise.

In this way, Yieldstreet is an on demand platform with the ability to be flexible and dial up or down investments based on the current market. It’s important that Yieldstreet is careful with the offerings on the platform since all loans they put on the platform are pre-funded through a warehouse facility before investors are able to allocate. This distribution risk aligns Yieldstreet’s interests with their investor base. This warehouse facility was just renewed and increased to $250 million with Soros Fund Management. Beyond Soros, Yieldstreet works with other banks which provide leverage facilities.

When I asked Mehere about why Citi was looking to expand their base outside of hedge funds and other large investors he noted that ultimately it was a question best suited for Citi. His view though is that this group within Citi called Citi’s Spread Product Investment Technologies (Sprint) is always originating and sourcing opportunities of all kinds. He believes that Citi recognizes that the investment landscape is changing and they want to be the catalyst for this change. Challenger banks and other investment platforms have established strong trust and credibility with the end consumer and thus deals like these can be a strong channel for a big bank like Citi.

As far as what the future holds, Yieldstreet believes there is still lots of room to grow with the enormous size of the private credit market in the US. Mehere also thinks we are going to to see a transformation of behavior from investors over the next decade. Digitally native consumers are going to be increasingly interested in offerings like Yieldstreet. Currently the median age of those participating on the platform is 41. It’s going to be interesting to see where Yieldstreet goes from here as they look for further opportunities that in the past have not been available to individual investors in the US.

More on LendIt Fintech News on Yieldstreet:

Invest Like the Top 1% With Institutional Grade Investment Offerings from Yieldstreet

Podcast 99: Milind Mehere of YieldStreet

Leading Banks are Embracing Digital Strategies More Than Ever

We take a look at how the major US banks are adopting digital strategies into their business

October 25, 2017 By Todd Anderson 1 Comment

While banks might have initially been slow to act when it came to embracing digital strategies they are now able to offer a comparable product to their fintech competitors. Through building their own technology, partnering with or acquiring emerging fintech companies, banks have received the message that they need to fully embrace the digital age.

The digital strategy at banks is now considered a core part of their business and essential to future growth. We wanted to explore how some of the biggest banks have been integrating digital strategies and making strategic acquisitions to enhance the customer experience or replace falling revenue in other areas of their business.

[Read more…]

Banks Going Digital – Transforming Branches, Apps and a Focus on Customer Experience

Banks know they must go digital and many are embracing new technology to improve the customer experience

June 22, 2017 By Todd Anderson 3 Comments

In Austin last week American Banker hosted their annual Digital Banking Conference where banks of all sizes gathered to discuss the innovation in banking today. There were a few main themes that came out of the event; banks are focused on transforming the customer experience, mobile first approaches are prevalent and technology solutions like AI and cyber security are becoming must haves within the bank.

The big banks have all started to understand that the traditional way of banking is a thing of the past. Keynote speaker Yolande Piazza, CEO, Citi Fintech talked about disrupting from within, changing how they operate to enable the customer and move to a mobile first approach. She explained how this approach is radical for a bank and the layers of compliance did not make the transition smooth. They have completely rethought how they hire, 50 percent of their fintech talent is from outside the company. They have looked towards fintech and technology companies to fill their pool, while the banking talent comes from within.

Consumer oriented experiences really drove a lot of the conversations at the event, banks and the vendors were all talking about how to best utilize the consumer’s time when they engage. Mobile apps seem to have become a bit of a competition among the banks, though some would describe it more as a competition of experience and not necessarily as a competition between different banks. No longer are banks looking to drive where the customers should go, they are looking for the customers to drive what they want in the experience.

Consumer experience is not limited to the digital channel; banks and companies like Samsung are also focused on changing the way people interact within the branch. In speaking to Reginald Jones, Director of Sales for Regulated Industries, he talked about how the consumer electronics giant is working with banks to help change the way people think and interact with their local branches. [Read more…]