The impact of digital assets on the wealth management and trust industries was discussed in a recent webinar hosted by Broadridge and sFOX.
Mike Tropeano, Vice President, Engagement Manager at Broadridge, led the conversation together with John Mannino, Chief Compliance Officer at sFOX, and Jack Finio, sFOX’s Head of Product.
The discussion addressed common concerns around digital asset security, regulation, and use cases. The experts covered a range of topics, including the recent guidance from the SEC on digital asset custody, the use of digital assets in estates and charitable foundations, and updates on current regulations.
Key questions addressed in the webinar
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In light of the FTX meltdown, what are some possible long-term effects that we can anticipate as we assess the overall market?
The failure of banks like Silvergate, Signature, and SVB shows the importance of good risk management in the banking sector and the emerging trends in the banking side of crypto businesses have become increasingly evident.
On the one hand, new companies within the crypto space are now facing even more challenges in establishing banking partnerships. As a result, they are looking towards neo banks and/or brokerage platforms like sFOX to access digital asset markets and navigate their complexities with ease.
On the other hand, existing companies with established banking partnerships are looking to diversify their network, leading to short-term operational complexity for the firms themselves, but with long-term benefits for client safety.
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Given the recent events and concerns raised over the lack of protection for client assets in the event of FTX’s bankruptcy, why would a Trust company be necessary?
The recent fallout of FTX and other platforms that held custody of client assets but did not act as custodians has resulted in a growing movement of assets towards regulated and compliant custodian platforms. This shift in the industry highlights the critical importance of ensuring client safety in the banking and custodial side of crypto businesses.
The FTX meltdown has left the cryptocurrency industry eagerly awaiting guidance. It was reported that customer assets were not held in segregated accounts that could be independently verified. As a result of FTX’s bankruptcy filing, clients may face difficulties recovering their assets.
This episode serves as a stark reminder of the need for institutional-grade custody solutions, such as those provided by trust companies with bankruptcy protection.
By operating as a trust entity, a clear segregation of client assets from company assets can be achieved. This framework allows for legal protection of assets in the event of insolvency, providing clients with peace of mind. When clients transfer their assets to a trust company, they retain ownership, and as long as the assets remain separate from company assets, they will be protected in the event of insolvency.
The decision by sFOX to establish a Wyoming-based trust company is a strategic move. Wyoming has provided clear guidance on what crypto firms can and cannot offer and has established a clearly regulated framework for providing digital asset services. Compliance and regulation in the industry outside of Wyoming remain gray areas, making it challenging to provide a secure and compliant service. Wyoming’s legal statutes provide a robust foundation for professional investors in the crypto space to store digital assets and use them for trading, staking, and leveraging prime services without compromising their peace of mind.
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What approach would you recommend for managing digital assets in an estate?
As the ownership of cryptocurrencies continues to rise, managing digital assets in an estate has become an increasingly critical aspect of estate planning for high-net-worth individuals.
To effectively address the complexities and challenges of managing digital assets in an estate, wealth managers must have a comprehensive understanding of the digital asset landscape. In response to this need, firms like sFOX have developed end-to-end solutions that provide trust officers and banks with a comprehensive strategy for managing digital assets in an estate.
SFOX offers a complete end-to-end solution for managing digital assets in an estate, consisting of four main components. The first component is a succession plan that helps recover assets held in hard wallets, digital wallets, custodians, or brokerage accounts for the estate.
The second component is a regulated and compliant custodian partner that securely stores the assets on behalf of the estate.
The third component is a liquidity provider that offers a reliable source of liquidity for executing liquidation scenarios of digital assets.
Lastly, SFOX provides an on and off-ramp that allows the estate to liquidate digital assets to cash and move the cash to the estate’s bank account.
By providing a solution that covers the custodian, liquidity provider, and on and off-ramp, SFOX allows trust officers to manage the estate’s digital assets directly and in a compliant, regulated manner while ensuring liquidity to extract the maximum value on behalf of the estate.
sFOX aggregates global liquidity and offers automatic best-price execution on trades, ensuring that trust officers can always extract the best price available for digital assets in a state liquidation scenario. With SFOX’s solution, trust officers and banks can effectively manage digital assets in an estate and provide their clients with the highest level of service and security. If you are interested in discovering more about our platform, we welcome you to schedule a call with one of our proficient experts.
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If a firm like sFOX is attempting to introduce a product into the market without regulatory clarity, what actions should they take, and how might this impact their business?
Navigating the cryptocurrency market can be challenging, especially for firms like sFOX that are trying to bring new products to market without clear regulatory guidelines. sFOX has taken steps to provide a secure and compliant service to its clients.
First, sFOX focuses on finding certainty where possible by seeking out clear guidance, as evidenced by the decision to launch Safe Trust Company in Wyoming, a regulated entity under the Wyoming Division of Banking. This provides a clear framework within which they can operate and gives them more clarity moving forward.
Secondly, sFOX takes a careful and diligent approach to testing and validation, both internally and externally, while working within existing guidance. We have established various processes and internal policies, including reviews of new coin listings, to ensure that all teams review them before launching them to the market. This may add some extra time to the launch process, but overall it gives sFOX and its clients a greater sense of confidence and assurance in the services they are offering.
