Crypto Firms Beef Up Compliance Hiring as Regulatory Scrutiny Mounts

Cryptocurrency companies are ramping up hiring in their compliance departments as they come under increasing regulatory scrutiny in the U.S. and world-wide.

Hamlyn Williams Inc., a global recruiter that focuses on regulated industries, said it has conducted 18 chief-compliance-officer searches for financial technology and cryptocurrency businesses in 2021, up from seven searches for all of 2020.

The regulatory pressures are mounting for businesses that create, host and trade digital currencies. Securities and Exchange Commission Chairman Gary Gensler said this month that he doesn’t see much long-term viability for cryptocurrencies, underscoring the importance he places on protecting investors and bringing the market under regulatory oversight. Mr. Gensler repeatedly has likened the crypto market to the Wild West and has urged crypto trading and lending platforms to register with the SEC, saying they likely are offering unregistered securities in violation of federal law.

Former regulators have joined cryptocurrency businesses in recent years, including ex-SEC Chairman Jay Clayton and Jaikumar Ramaswamy, previously a Justice Department official in charge of asset forfeiture and money laundering.

The cryptocurrency unit of popular trading platform Robinhood Markets Inc. and Binance Holdings Ltd., a large cryptocurrency exchange, have both bolstered their compliance staffing in recent months. Binance said this summer that it was expanding its international compliance team, a move that came as authorities in the U.K. and Japan said the business isn’t registered to operate in those countries. Meanwhile, last week, China reinforced its tough stance against the sector by declaring cryptocurrency transactions illegal.

Hamlyn Williams said the pace of compliance executive searches has ramped up over the past 15 months. The recruiter has placed seven CCOs at fintech and crypto companies in the past five months alone, said Will Brown, the executive search lead for financial services at Hamlyn Williams.

Companies in the crypto and fintech sectors—many of them launching their businesses and on the hunt for seed financing—are searching for chief compliance officers to help them manage complex regulatory issues, such as obtaining a license to operate in the U.S., Mr. Brown said.

“It almost becomes business-critical [for these firms] to have a compliance individual,” said Mr. Brown, who has worked in the executive search field for seven years.

Fintech and crypto startups are facing a competitive market for talent, he said. The talent pool typically includes former regulators who recently left the government and executives from other fintech or crypto firms as well as banks. But placement at a startup often requires a fit with the company’s culture and the risks it faces, and these chief compliance officers will need to navigate an opaque regulatory landscape and potentially fewer financial and personnel resources, he said.

The crypto sector, nonetheless, has matured to a point where it has begun luring professionals from banking, Mr. Brown said.

“A lot of people from banks want to move to crypto,” he said. “It’s interesting, and it shows a new challenge…There is no legacy issue, there is a big opportunity to build a function from the ground up.”

The pay these startups are offering CCOs is slowly catching up to remuneration at traditional financial institutions, with salaries typically ranging from $250,000 to $450,000 a year, and often equity stakes on top of that, he said.

The skills required of the ideal crypto firm CCO candidate can vary, Mr. Brown said. The desired experience for a candidate could include financial crime compliance, building “know your customer” programs, and developing compliance programs that meet SEC requirements, he added.

Mr. Clayton, who stepped down as SEC chairman at the end of 2020, has returned to law firm Sullivan & Cromwell LLP and this summer, he joined cryptocurrency custody platform Fireblocks Inc. as an adviser.

The crypto sector will increasingly focus on compliance issues, seeking to align crypto technologies with conditional regulatory principles, he said.

“These types of products…whatever function they’re performing, they’re going to follow the same rules and regulations that they’re replacing,” Mr. Clayton said. For example, if a crypto asset is used to transfer money around the world, he said, the same anti-money-laundering, Bank Secrecy Act principles should be applied to those transfers.

Former regulators are primed to provide guidance to the crypto sector, Mr. Clayton said. “You’ve had a technological step change in our markets. Exactly how to map compliance to that technological step change is something that requires a lot of attention,” he added.

Mr. Ramaswamy, the former Justice Department official, since late 2019 has been head of risk, compliance and regulatory policy at cLabs, a fintech company that works on Celo, an open-source ledger with an initial focus on mobile phones. After about a decade rooting out federal white-collar crimes, he said he was attracted by the opportunity to create a culture of compliance at a financial institution.

Earlier, Mr. Ramaswamy was head of enterprise risk management at Capital One Financial Corp. Making the leap from traditional finance to crypto gave him a chance to “get in at the ground floor” to shape things, he said. He believes the crypto sector is at a crossroads as the industry is becoming more sensitive to compliance issues and is trying to address them proactively, requiring a new way of thinking, he said.

“I think it’s one of the few places where, as a compliance professional, you can help shape the industry,” he said.

Source: WSJ

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