John Mannino Podcast Transcript
John Mannino joins host Brian Thomas on The Digital Executive Podcast.
Welcome to Coruzant Technologies, Home of The Digital Executive podcast.
Brian Thomas: Welcome to The Digital Executive. Today’s guest is John Mannino. John Mannino is the Chief Compliance Officer at sFOX. He joined sFOX after more than two decades of extensive operations and regulatory compliance experience at Goldman Sachs, where his last position was Senior Vice President, Global Head, Regulation Assurance and Compliance.
He has worked at Goldman Sachs offices in New York City, Los Angeles, Zurich, and London, where he oversaw daily compliance across multiple global regulators in the OTC, derivative margin, and collateral sector, while also continuing to navigate the rapidly changing derivative regulatory environment. As it emerged around the world,
Well, good afternoon, John, welcome to the show!
John Mannino: Thanks for having me excited to be here.
Brian Thomas: Awesome. Absolutely. Same here. Love doing this stuff. And John appreciate you making the time hailing out of the great state of California there in LA. I’m in Kansas City, so we’re making up some time here, but John, let’s just jump right into your 1st question here.
What motivated your transition from traditional finance markets at Goldman Sachs to the cutting-edge cryptocurrency market at S Box and how did your previous roles influence your approach as the Chief Compliance Officer there at sFOX?
John Mannino: Yes, you know, so Brian, it’s actually, it’s very, very interesting you know, so when I look at my time at Goldman specifically you know, a good chunk of that time was really sort of spent in the OTC derivative market.
Place, and it was really sort of, you know, in the margin and collateral space for a whole portfolio of, you know, derivatives, you know, and so those included things like interest rate swaps, credit derivatives, equity derivatives, FX, commodities. So, it was kind of like the whole host of OTC type of, of derivative trading. world.
And you know, that was a really you know, while I was there, it was during a time of really explosive growth in that area where, you know, we were just doing a ton and ton of trading in that space. And the volumes were kind of going through the roof and we were really just trying to actively manage it, all of that.
And then, you know, and that was a pretty sort of unregulated you know, type of product really sort of at that time, or, you know, this is sort of right before the sort of the financial crisis of 2008 really happened. Right, the 2008 financial crisis happens, the world kind of, you know, almost implodes there, if you will and a lot of stuff really sort of change in that marketplace.
And 1 of the biggest changes was, you know, you know, the implementation of the Dodd Frank rules, and then more broadly, kind of the unclear margin rules, you know, more on a kind of a global scale. And so that went that industry in and of itself kind of went from something that, you know, was very cutting edge.
Very technology focused and was really sort of having explosive growth to one that kind of came to a bit of a screeching halt and then really became one that was very regulatory focus from that and so kind of pivoting sort of from that, you know, I’m taking a lot of the things that I learned sort of from that time and, you know, And bringing that into really sort of this new role in this sort of the crypto space, right?
You know, I think it’s really sort of fascinating, right? The products, those products, those derivative products, there’s a lot of sort of similarities, you know, if you think about it, right? It’s a combination of utility. It’s a combination of technology and mathematics kind of all bringing all kinds of coming together in into 1 sort of new kind of product.
And so what I’m doing right now is really just trying to kind of leverage the, you know, the experience that I’ve had in that space and really trying to manage this kind of on a, on a go forward basis, because there’s a lot of things that we can kind of learn. There are some things that, you know, yeah. Didn’t go so well and some things that are really, you know, important new things that we should be considering in the crypto space.
So, a lot of those things I’m trying to kind of bring forward and I think that there’s a really good synergy between the, you know, the old sort of traditional finance world and sort of this new kind of, you know, decentralized finance
Brian Thomas: Thank you for the back story and obviously you can bring a lot to the table as we look to really move into this digital space.
By the way, this. Publication of ours here is built on blockchain. So, we’re enthusiasts of blockchain technology and crypto, and we’d really do love this. So John, I appreciate the backstory and I welcome you to this community, which we need to give us more support to obviously during these times.
But John switching gears to the next question, given your role in bridging traditional and crypto markets, what do you believe are the key factors driving institutional adoption of cryptocurrencies and how is S Fox facilitating this transition?
John Mannino: Yes. So, you know, I think that there are a lot of important factors.
I want to touch upon really what I kind of consider four key ones. So, the first and foremost, right, is I think, you know, from an institutional perspective, I think that there is a growing acceptance of this as a new asset class and the legitimacy sort of tied to it now. And I think one of the biggest things which we’ve just recently seen, right, Is the really sort of the approval by the SEC of the Bitcoin ETFs, right?
This has really just sort of solidified, you know, Bitcoin in and of itself as a true sort of cryptocurrency, the leader in the cryptocurrency space. But really sort of helped to legitimize the cryptocurrency space. You know the universe, if you will, a bit. And so I think with that, that that was like a number one, that was like a really, really important key factor in driving sort of the institutional adoption of this, right?
So, this is, this is, you know, critically, critically important. A second piece, right. Is I think, you know, crypto really, right. Right. This adds to portfolio diversification. Right? This is a brand-new asset class and, and it now allows institutions to have sort of exposure to a new asset class. It really sort of hasn’t been out there.
That really helps allow for a proper, you know, diversification in a wide sort of portfolio of assets that you have. So, I think that that is, you know, critically important, really, from you know, an ongoing perspective. A third item I would say is, like, you know, there’s just demand from clients, right?
Like, there is a huge appetite for this, and I think, you know, The Bitcoin ETF is I think a perfect example of showing sort of like that appetite, right? Like in, in really in sort of in record time, you know, the, the Bitcoin ETF surpassed silver as a, as a commodity ETF is really sort of only just sort of tracking behind gold.
And it was probably, it was kind of like nipping on its heels really as the leading commodity. ETF out there, right? And so really where that’s coming from, like, that’s really just this pent-up demand that’s really kind of coming from, from clients that want to have some sort of exposure to this new asset class, right?
Again, because it ties on, it’s all the building blocks of the other points that I’ve just sort of said, right? It’s just the growing acceptance and the legitimacy of it and the diversification of kind of having this in your, in your portfolio. I hope that helps. I think also really what’s ended up happening then too is we’ve also begun to see now the institutional infrastructure that’s sort of associated with this.
And this includes really, you know you know, custody solutions. That help make custody of crypto easy more widely accessible and very easy for, for people the, the growing number of, of sort of trading platforms that are sort of out there, just like S boxes and then just sort of, you know, these sort of things like the Bitcoin ETF, which are regulatory complying investment products, right?
All of those things are just really, really important in the whole sort of, you know infrastructure and ecosystem of the, of the crypto space. And so, you know, with all those, like, those are things that I think also then too, like, you know, we have, you know, we at Xbox here have some really, really great solutions that help sort of meet That those institutional sort of demands, if you will, in this space we have a Wyoming based trust company that is sort of, you know, our custody solution.
Right? And so, what ends up happening is you can custody your crypto assets through our Wyoming trust company. That is a bankruptcy protected Wyoming regulated entity. Right? And so, what that really means when I talk about bankruptcy protected is that it’s those assets, including all your crypto, right?
Are clearly ring fence and clearly segregated. Away from any sort of firm assets and, you know, we saw this as a really problematic item that occurred, you know, within the FTX space and that whole and the FTX bankruptcy, right, where there was just a ton of just commingling of firm assets and, and client assets.
And so, you know, we’re still trying to unravel all of that today. And so our safe trust offering really allows for, you know, those to be protected in the unlikely event of, you know, our bankruptcy. And then also has the regulatory sort of oversight of all that. One final thing that I do want to kind of just sort of touch on here then too is, you know, I’ve talked a little bit about the Bitcoin ETFs and how that has been, you know, pretty transformative for our, for our industry.
But the interesting thing sort of about this is, and I do get it, right, for many institutions, this is a way to have exposure to this asset class without actually having to physically own, you know, Bitcoin as an asset. But, you know, when you take a step back and you look at and for most investors, things like, you know, like a gold ETF and a silver ETF, like those commodity type of ETFs, they make sense because, right, it’s hard to.
You know, actually go out and physically buy gold, you know, large quantities of gold to store it, you know, and then to subsequently sort of sell it. So, you know, an ETF makes a lot of sense in that space, right? It’s great, it’s an easy way to sort of facilitate that. With Bitcoin, right? You don’t necessarily have that, right?
So, you know, Bitcoin in and of itself, like, you know, as I said, you know, you can come to, you know, you know, our come, you know, come to our site, open up a, you know, open up a an account through our trust company where you have your, your, your custody there, you kind of go through just sort of your normal AML and KYC type of stuff.
But, you know, we can get that account open pretty fast. And then you have the ability to go out and physically buy, you know, Bitcoin and, and hold it and have custody of it and sell it, you know, buy it and sell it and hold it however you want, however long you want. And again, you know, we’re 24-7, it’s a 24-7 market, so you can buy and sell anytime that you want.
And so, you know, while ETFs have been great. In the legitimacy aspect of it, you know, the reality of it is for most investors, right? They can, they could have already very easily bought and sold Bitcoin. And so well, we love the Bitcoin ETF and kind of the ability to. You know, for a wider group in it, and especially for institutions, which may have a little bit more restrictions around kind of having, you know, direct access to crypto for most investors, right.
You know, you kind of have access to Bitcoin without actually having to, you know, go through an ETF model.
Brian Thomas: Thank you. I appreciate breaking all that down. I really do appreciate that, John. And John switching gears. Just if you could briefly share based on your various articles, insights that you do provide, what are your predictions for the future of cryptocurrency regulation, especially around concerning global securities and financial innovation acts?
John Mannino: Yeah, well I, I wish I had a crystal ball that could easily predict this, but I will, I will take I will take the easier one’s first. And so, what I’m going to do is 1st, go outside the U. S. right? And so, outside the U. S. there are, you know, there is some really, really yeah, Important legislation that actually has been passed.
There is a European Union legislation, which will be going live later this year, which is called Mika, which allows for cryptocurrency platforms like ourselves to. You know, obtain a license through, you know, one of the European Union countries and then allows for sort of passporting across all European Union countries.
And so, you know, this helps tremendously in kind of, you know, a, a broader outreach as opposed to having to get a license country by country type of situation. And it kind of levels the playing field and makes sort of everybody, you know following all the same, you know and adhering to all of the same rules from a European Union perspective.
So that’s a really critical piece. You know, we’ve seen other things happening, you know, in you know, in the past, in the past few years you know, in the in the UK specifically, there, there is. Yeah. Some crypto legislation that has been moving along and passing pretty through a lot of the, the regulatory environment, specifically in the, in the FCA and then in Asia, we’ve seen a lot of stuff then to specifically, you know, with the monetary authority in Singapore.
The Hong Kong Hong Kong authority and actually also, we’ve been seeing, you know, things happening sort of in the Japanese space. So, there’s a lot of great activity. That’s actually happening from a regulatory perspective outside the U.S. And. You know, while that’s great, it does make, it does create an a point of concern really for many US based companies and just sort of thinking about how, you know, the US is really starting to.
fall behind many other places around the world in this space really because we haven’t been able to clearly get our act together as it relates to any type of crypto regulatory environments or in the U.S. We have seen, you know, time and time again, what is happening with the U.S. regulators, specifically with the SEC.
Is this, you know, this approach of, you know, regulation by enforcement, which is very, very problematic for many, many people within the industry. And that’s just not an approach that is going to really sort of work. And it’s not a long term, sustainable approach and is really potentially. Forcing people outside of the outside of the U.
So, to sort of set up shop you know, in jurisdictions that are outside the, you know, the boundaries of the U. S. which is, you know, not necessarily the most ideal solution. And so I think, you know, there’s a few things that I do pin some glimmer of hope on in you know, from a U. S. perspective. Number 1, I think the 1st thing is just sort of stable coin legislation, which I think is, you know, what is commonly referred to as the low hanging fruit in this space.
Right? This is pretty common sense. Yeah. Legislation, it kind of puts, you know, it puts, um, some of the other kind of, you know, questionable sort of stable coins processes that are there, it puts a little bit more structure and organization around kind of how, you know a stable coin can be monitored and, and attracting of all that.
And that is really, really important because stable coins continue to be an important component within the cryptocurrency space. And then I look at things, you know, that are, and, and, you know, in this very sort of polarized U.S. political environment, I do feel that, you know, crypto is something that is a little bit more bipartisan than most things.
And I do look at a, a piece of legislation that is out there, which is put together by two senators who I think Are probably polar opposites on everything else. But the Loomis Gillibrand bill, which is Cynthia Loomis, who is a Republican from the state of Wyoming and Kristen Gillibrand, who’s a senator, a Democratic senator from the state of New York, they’ve come together, and they really have put together a very, very comprehensive bill.
Bipartisan bill that in reality looks a lot like a lot of the components of Dodd Frank in the sense of it looks to have both the CFTC and the SEC be regulators of crypto. Basically kind of coming back down to, you know, if the crypto is deemed a security, which is the big kind of giant question that has been, you know causing a lot of, of angst in the industry, then it falls within the sec, but if it really is a commodity where how most people feel that most cryptocurrencies are then it falls within the realm of the CFTC.
And that is, you know, the same kind of framework that that Frank put in when we looked at kind of going back to like the derivative space that I was talking about a little bit earlier. And so, with those 2 key kinds of components, I think what you see then is this idea that, you know, you’ll have a dual regulator But it really kind of comes down to whether the crypto is a security or not.
And then what you really have to have in that bill is some, some rules of the road and really sort of putting down, you know, pen to paper around what exactly is and how you determine whether a, a, a cryptocurrency is a security or not. And having that actually be part of a legislation and not.
Something like that we do today, which is done through the Howie test, is really is just part of the results of a lawsuit and so it’s not actually pure legislation component. And so, I think with that, though, I do have hope that that is going to be sort of where things are going to be sort of moving towards from a U.S. perspective. But you know, I look at things like Europe, and I think I look at parts of Asia, and they are really starting to kind of pull away from the, you know, where the U. S. is from a regulatory perspective. And I think, you know, in a post, you know, post FDX world. Especially institutions are looking for, you know are looking for a compliant organization to do, to do their crypto trading in.
And I think, you know, many U. S. companies like us, like many other players, like we, you know, we, we want to be compliant, you know, just give us the rules of the road and we will be compliant, but you got to, you got to put down the rules of the road. That’s where I think sort of where things are heading in the crypto regulations space right now.
Brian Thomas: Thank you, John. I appreciate that. Really do. And, you know, again, you bring a wealth of knowledge to this industry. So, John lightning question here, lightning round, if you could give us your thoughts on this next question here in about 30 seconds, drawing from your extensive background in trad fi, right?
Traditional finance and appliance. What lessons do you believe the crypto industry should adopt to foster growth while ensuring security and compliance?
John Mannino: Yeah, I think the number one key thing, right. It, that we have seen time and time again. As you know, you need to have a compliant organization, you know, backing up your platform.
Right? And that is shown where we’ve seen, you know, finance and FDX, they’ve clearly shown the consequences of having a compliant organization. A poor risk management program and really sort of lacking on the compliance side of things. And I think that is a key, key factor, right? That many, you know, that we’ve seen now with many of our, our counterparties in looking into, they want to do business with a compliant organization and that is really the number 1 thing that needs to be done.
It’s that we need to draw the cryptocurrency industry needs to draw in and really help with future growth.
Brian Thomas: Thank you. And I think that is important. Although if you look across a broad, you know, events in the trad-fi industry, there’s been a lot more, but, but it’s okay. We know we still need to bring some of that risk mitigation to the crypto industry, of course.
So, I do appreciate your thoughts and love that you are coming out of trad by moving into defy. It’s really going to help. I think faster adoption. So, John, it was such a pleasure having you on today and I look forward to speaking with you real soon.
John Mannino: Thanks, Brian. I’m always happy to chat with you.
Brian Thomas: Bye for now.
John Mannino Podcast Transcript. Listen to the audio on the guest’s podcast page.
