James Cirrone

Fireblocks CEO and co-founder Michael Shaulov had some harsh truths to share for institutionally-minded crypto natives —&nbsp;that is, people who want to see Fortune 500 companies develop blockchain solutions and dive headfirst into Web3.



“The crypto native crowd is a subset of the market that they are interested in going after,” Shaulov said during the Permissionless conference today in Austin, Texas. “Most of their addressable market is actually people that have never interacted with crypto or Web3 before.”



That’s why, Shaulov said, it’s even more complicated for large, household-named corporations to launch successful Web3 ventures.&nbsp;



Meta’s <a href="https://blockworks.co/tag/meta">Diem</a> project is a perfect example of a big company misfiring in the blockchain space. Formerly known as Libra, Diem was Meta’s ultimately unsuccessful attempt to introduce a stablecoin.&nbsp;



But this isn’t something that’s just an issue with Meta, according to Shaulov.



He cited a recent Coinbase <a href="https://www.coinbase.com/blog/more-than-half-the-fortune-100-are-developing-blockchain-initiatives-to-stay">survey</a>, which found that 52% of the Fortune 100 have established some kind of initiative relating to Web3 or crypto since 2020.&nbsp;



Looking at that number in isolation makes the state of adoption look rosy, but Shaulov said he believes that fewer than 50 recognizable brands have launched major Web3 initiatives that are repeatable.



That’s simply because there’s too much risk, which exists mainly on the regulatory front, Shaulov said. The confusion companies deal with boils down to things as foundational as how to structure a balance sheet when crypto is involved.



“If you have [ether] <a href="https://blockworks.co/price/eth">ETH</a> you need to pay for transactions or you’re holding assets for your clients, how do you account for it?” Shaulov remarked.



Additionally, companies may be wary of entering crypto because of all the different licensing regimes worldwide, Shaulov contended. Finally, security concerns linger for companies that might debut wallet-based products.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Institutions remain risk-averse about crypto, says Fireblocks CEO

Jacquelyn Melinek

<div id="highlights-block_61f1bdfa819a4" class="highlights">
 <ul>
 <li>“We think it’s inevitable that every business will need to work with crypto or digital assets,” Fireblocks CEO Michael Shaulov CEO said</li>
 <li>The round was co-led by D1 Capital Partners and Spark Capital</li>
 </ul>
 
</div>



Digital asset custodian Fireblocks has raised a whopping $550 million round, bringing its total fundraising haul to more than $1 billion.&nbsp;



Fireblocks is now valued at more than $8 billion after the Series E round. CEO Michael Shaulov told Blockworks it’s “inevitable that every business will need to work with crypto or digital assets.”



CEO Michael Shaulov told Blockworks the company — valued at more than $8 billion after the Series E raise — thinks it’s “inevitable that every business will need to work with crypto or digital assets.”



To that end, the firm grew its institutional clients from 150 to 800 last year — an increase of 433%. The company expanded its presence in the Asia Pacific region, as well as Europe, the Middle East and Africa.&nbsp;&nbsp;



The company plans to hire engineering and customer operations staffers with the capital, Shaulov said.&nbsp;



“Of course, we’re starting to see applications that are outside of the traditional financial institutions which we find the most exciting and where we’re planning to take a big chunk of the funds to allocate resources there,” he added.&nbsp;



The hot fundraising demand stems from accelerating institutional adaptation of crypto, as well as corporations looking to build, and safekeep, first-time crypto products, the CEO said.&nbsp;



The round was co-led by D1 Capital Partners and Spark Capital with participation from General Atlantic, Index Ventures, Mammoth, CapitalG, Altimeter, Iconiq Strategic Partners, Canapi Ventures and Parafi Growth Fund.&nbsp;



Fireblocks now has $45 billion of custodied assets. Earlier this month, Fireblocks joined Aave Arc to launch a permissioned version of its decentralized finance liquidity protocol so that institutional players could join in DeFi, Blockworks previously <a href="https://cms.blockworks.co/aave-arc-to-provide-30-financial-institutions-access-to-private-pools-of-defi-liquidity/" target="_blank" rel="noreferrer noopener">reported</a>.&nbsp;



“Long term we are investing in developing the easiest to use platform for crypto operations,&nbsp; expanding the Fireblocks Network, and enabling support for NFTs, DeFi, payments, and tokenization,” Shaulov said.&nbsp;



A top priority for Fireblocks this year is to make a big push into Web3. Its platform supports over 30 blockchains and 1,000 cryptocurrencies with $2 trillion in digital assets transferred. It powers use cases across trading, gaming, NFTs, digital securities and payments with a focus on transitioning the digital asset economy from Web2 to Web3. 



“Crypto will continue to drive key innovations in the traditional financial sector,” Shaulov said. “By the end of 2022, we believe a majority of traditional financial institutions will have either already launched or will be close to launching new crypto products and services.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Crypto Custodian Fireblocks Eclipses $1B Raised With $550M Series E

<div id="highlights-block_615f2f4413ddc" class="highlights">
 <ul>
 <li>“We were very excited to partner with them because there’s a lot of opportunities in the German market,” Michael Shaulov, CEO of Fireblocks said to Blockworks</li>
 <li>While Bankhaus von der Heydt is Fireblocks’ latest client, it said it has supported a handful of traditional banks in the past including BNY Mellon, Signature Bank and Siam Commercial Bank</li>
 </ul>
 
</div>



One of the oldest banks in Germany, Bankhaus von der Heydt, is using digital asset custody provider Fireblocks to expand its offerings of digital asset banking, securitization and fund services. 



Fireblocks will be supporting the traditional and privately-owned Bankhaus von der Heydt to leverage its custody services alongside the Fireblocks Network to expand digital asset and crypto products to its customers, the company said Thursday.&nbsp;



Bankhaus von der Heydt was founded in 1754 and is 267 years old, making it one of the oldest banks in Germany to offer crypto custody and trading services. In December 2020, Bankhaus von der Heydt partnered with Bitbond to <a href="https://www.financemagnates.com/cryptocurrency/news/german-bank-introduces-first-euro-stablecoin/" target="_blank" rel="noreferrer noopener">issue</a> the first euro stablecoin (EURB) on the Stellar network. 



“Although the crypto assets are held in trust by Bankhaus von der Heydt, they are not subject to any explicit insurance. In particular, there is no protection by the deposit insurance,” the bank said on their <a href="https://www.1754.eu/faq" target="_blank" rel="noreferrer noopener">website</a>.



Since launching in June 2020, the Fireblocks Network has amassed over 500 liquidity partners who actively move assets across 30 of the world’s largest digital asset exchanges, such as Binance, Bitfinex, Coinbase, FTX and more, Blockworks <a href="https://cms.blockworks.co/former-sec-chairman-jay-clayton-joins-crypto-platform-fireblocks/" target="_blank" rel="noreferrer noopener">reported</a>. 



“We were very excited to partner with [Bankhaus von der Heydt] because there’s a lot of opportunities in the German market,” Michael Shaulov, CEO of Fireblocks, told Blockworks.&nbsp;



Fireblocks has seen strong demand and fast growth in Europe and operates with people in the United Kingdom, Nordics, France, Germany and Switzerland, Shaulov said.



<blockquote class="wp-block-quote">“It&#8217;s a pretty important market for us. The European market is quite dynamic, you have a lot of challenger banks that we had the opportunity to partner with and FinTechs over there are very active, so it allows us to find very interesting clients that have meaningful activity that extend our reach and services to a large population of consumers,” Shaulov said. </blockquote>



While Bankhaus von der Heydt is Fireblocks’ latest client, it said it has supported a handful of traditional banks in the past including BNY Mellon, Signature Bank and Siam Commercial Bank. Siam Commercial Bank, BNY Mellon and SVB Capital have all invested in Fireblocks previously. With that said, Shaulov said banks are realizing they need to be a part of the transformation of digital assets.&nbsp;



“At the end of the day [banks] weren’t as prepared as they thought they were and at this moment in time, people always say change happens very slowly then suddenly and that’s what happened there,” Shaulov said. “It moved from no one will ever touch [crypto], it’ll die, to this,” he said.&nbsp;



In August, former US Securities and Exchange Commissioner Chairman Jay Clayton joined Fireblocks’ advisory board to help guide Fireblocks “on navigating requirements for the support, development and deployment of solutions for the emerging digital asset infrastructure,” the company <a href="https://cms.blockworks.co/former-sec-chairman-jay-clayton-joins-crypto-platform-fireblocks/" target="_blank" rel="noreferrer noopener">said</a> at the time.



In late July, Fireblocks <a href="https://cms.blockworks.co/funding-news-fireblocks-eco-and-saber-labs-all-raise-millions/" target="_blank" rel="noreferrer noopener">raised $310 million</a> in Series D funding, just four months after its last $133 million Series C round, the company said in a statement. Sequoia Capital, Stripes, Spark Capital, Coatue, DRW VC and SCB 10X co-led the round alongside Siam Commercial Bank, Thailand’s oldest bank. 



Going forward, Fireblocks plans to expand its client base and focus on DeFi, Shaulov said.



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



<hr class="wp-block-separator"/>

Bankhaus von der Heydt Will Custody Crypto with Fireblocks

Sam Reynolds

<div id="highlights-block_60e767b19bf25" class="highlights">
 
</div>


<div id="highlights-block_60e767bc9bf26" class="highlights">
 <ul>
 <li>Satisfying regulators about the issue of KYC/AML is key to further integrating DeFi into institutional finance</li>
 <li>A big part of this would be an attitude shift, from libertarian free-for-all to embracing regulations </li>
 </ul>
 
</div>



Institutions are keen to integrate decentralized finance (DeFi) but the hurdle of rules around know-your-customer (KYC) and anti-money laundering (AML) and regulatory uncertainty makes institutions take pause, according to Galaxy Digital’s CEO Mike Novogratz and others featured on a recent Blockworks <a href="https://cms.blockworks.co/webinars/next-steps-for-institutional-defi/">webinar</a>.&nbsp;



“I&#8217;ve had lunches and dinners with the CEOs of the eight biggest banks in the last two weeks. The realization that bitcoin was a missed opportunity has dawned on them. But bitcoin wasn’t a threat. DeFi is a threat,” Novogratz said. “Most institutions are behind on the curve.”



Institutional skepticism — what needs to be overcome to move from an exploratory conversation to implementation — comes down to laws around knowing who you’re dealing with and ensuring you are doing what you can to stop money laundering.&nbsp;



“How am I going to get comfortable that on the other side of the smart contract is not a terrorist financer or a North Korean,” Novogratz quipped.&nbsp;



The ‘64,000 question is’, he continued, we love you for being 82 or 46 percent compliant with your good customers, your white labels, but we really don’t like the blacklist customers.



Although this risk is small, it occupies a considerable portion of the mindshare of regulators, panelists agreed.&nbsp;



<h3 class="wp-block-heading">Automation skepticism</h3>



Then comes the question of technology. Part of DeFi’s efficiency stems from the fact automation is integrated into its DNA. Automated Market Makers, which power the liquidity pools that allow for DeFi to provide impressive yield, might not be ‘battle tested’. In theory, the code works, and there are tens of billions of dollars of successfully closed transactions to prove it, but automation brings skeptics. 



Fireblocks CEO Michael Shaulov equates it to the skepticism transportation regulators have towards self-driving cars. A car crash, much like a market crash, can be an expensive event and there are questions of liability when anything automated is involved. 



<figure class="wp-block-image size-large"><img decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/webinar-panel-defi-1024x556-1.jpg" alt="Panelists discuss DeFi and institutions on a recent Blockworks webinar" class="wp-image-5417"/><figcaption>Panelists discuss DeFi and institutions on a recent Blockworks webinar </figcaption></figure>



“It’s a matter of being battle-tested. How are we going to regulate self-driving cars? What does autonomy mean from a regulatory standpoint?” he said. 



“I don’t think the community has articulated the benefits clearly enough on why DeFi is so awesome,” added Novogratz. “The big macro is ‘we’re going to cut out the rent takers, look at these yields I’m getting’. But there needs to be more articulation of why this could change, why it could be the platform of the new generation.”



Novogratz equates it to the iPhone. Once Apple added a camera and GPS, while properly articulating the benefits of both, the mobile revolution really kicked off and next came Uber.



Some of this might also come from a knowledge gap, Shaulov believes. How is it that these “magical internet machines can give me 6% APY, but I can’t get it from my regular bank.” After all, unlike a bank, these protocols are overcollateralized. Meaning there’s extra insulation against a run or a crash. But the fact that their inner workings aren’t widely understood is problematic.&nbsp;



<h3 class="wp-block-heading">What about DeFi bank runs?</h3>



On the topic of bank runs, Stani Kulechov, CEO and Founder of Aave, said that DeFi is the antidote to this.&nbsp;



“Part of the problem in 2008 is that we didn’t know how exposed banks were to each other. What makes DeFi beautiful is that because of blockchain you can look at the exposure. You can see the balances available,” he said.&nbsp;



Case and point, last<a href="https://cms.blockworks.co/crypto-crash-when-musk-the-environment-tax-day-and-china-collide/"> month’s digital asset crash</a>. While the market hasn’t recovered yet, it also didn’t implode.&nbsp;



“We had a crash. We recovered. The system works. Might have been painful for a lot of consumers, but the system worked. My big hope and worry is that we don’t have regulatory overreach. There’s a need to engage with DC,” Novogratz said. Part of avoiding regulatory overreach is a shift in mindset away from a libertarian-leaning ‘screw it, they knew the risk. Buyer beware’, as Novogratz explained this doesn’t resonate at all with regulators, to something where there’s more concern about how the customer is treated.



And of course, hiding from this or moving offshore to a far-flung jurisdiction isn’t really the answer. Institutions won’t be able to get involved without regulatory clarity. 



The long arm of the law is really long, Novogratz reminded the panel’s audience, and US authorities are happy to engage in extraterritorial enforcement.&nbsp;



“Just ask<a href="https://www.nytimes.com/2020/10/01/technology/bitmex-bitcoin-criminal-charges.html" target="_blank" rel="noreferrer noopener"> Arthur Hayes</a>,” he said.