Marcie Bomberg-Montoya spent 25 years in banking before finding her way to her current position as Strategic Advisory Services Leader at Wipfli. She’d always been tech-forward and a futurist, so she was fascinated when a client asked her “What do you know about the blockchain?” almost ten years ago. “I fell down the rabbit hole,” Bomberg-Montoya says. “I started digging into the uniqueness of crypto and realized what a gamechanger that underlying technology could be.”
Today, Bomberg-Montoya works with financial services clients to strategize on the ways they view the future in the digital age. More and more of her conversations have started to center on how to provide crypto options to their customers.
She also spends a lot of her time on the speaking circuit, brought in to educate on the growing crypto space. “I was in traditional banking for many years, so I speak their love language,” she says. “I can explain the opportunity from a former banker’s perspective.”
We gave Bomberg-Montoya a call to better understand what it will take for traditional finance players to embrace crypto, what role regulators will play, and how the current downturn will change the future of crypto.
Many organizations have been slow to think of themselves as technology companies in the business of banking. Some still think of their organization as defined by their brick and mortar. However, more are understanding that technology is key.
When I joined Wipfli four years ago, I was banging this drum about digital assets and blockchain and, as us nerds came out of the bushes, we realized, "Okay, we need to organize." We saw, "Gosh, there's this associate who's working with VC funds who are holding crypto who's doing audits there. There's this associate over here who's actually auditing one of the largest exchanges. And on and on." We were doing the work and had a front-row seat to what was happening in the rapidly evolving market. When I started talking to some of my more adventurous banker friends, they were wanting to be the first to market in some aspect of crypto. What they saw was that their deposits weren’t leaving to go to other banks or other credit unions; they were leaving to go to Coinbase or other wallets and exchanges. Their curiosity was, "Where's this going? How do I stem this flow? How do I stay relevant?" Banking is a function to most people these days, especially for younger generations, banking is a utility. So how could they view these services in a new way?
When talking strategy around crypto for our financial services companies, I lead with: "What do you want to do? Do you just want something as a hedge because you don't want the money outflow? Or do you see this as a service that is going to be required for the future as part of a banking suite?" The next generation thinks very differently about money than Boomers, and even Gen X. Money is a completely different idea to them: with tokens, crypto, NFTs, and the various ways they fit into their digital lives. So, we've got around 47% of our clients surveyed that are thinking, "I'm not touching this, because there's too much regulatory uncertainty." Banking has been relatively prosperous, so there hasn’t been a need for them to reinvent themselves. But I think eventually every financial institution will have to evolve to thrive. How that evolution occurs will differ greatly.
For those that have decided to jump in, there definitely are two distinct mindsets: a defensive hedge and then one that is proactive. Our client base includes credit unions, banks, wealth advisors, trust companies, and insurance companies, and it has nothing to do with their size. It has everything to do with the mindset of leadership. So, the financial institutions that want to be all in, want to be first, have taken the time to understand the space, even during this very turbulent moment. They're very clear-headed and know that the regulators are playing catch up. But unsurprisingly, the fact that regulators are lagging has actually caused stasis for some other financial institutions.
One example is a bank that once had a strong brick-and-mortar presence, but has really morphed into more of a digital bank. They're going through a regulatory exam right now and their regulators said, "We don't want you to do anything in crypto until we catch up." The bank can't just wait for them to catch up. The horse is already out of the barn — the wish is for the regulators to know how to put a fence around those horses!
There is a need for responsible regulation because there are some bad actors out there. Regulation will bring some calm to this space, hopefully without stifling innovation. It will help to weed out those bad actors and answer the essential questions about new entrants: “Is it a security? Is it not? Is it truly a stable coin? Is it not? How is this all working?”
We as a firm had the foresight several years ago to join the Chamber of Digital Commerce, which includes key players from all of the major compliant exchanges, law firms, professional-service firms, to big tech. It includes a lot of the larger financial services companies and some smaller ones, too. What the Chamber is doing is it's actually advocating for responsible regulation. There are a lot of extremely intelligent folks talking about where things are going on Capitol Hill and how we can be an advocate to help write those laws.
As Hester Peirce at the SEC has explained, they are trying to regulate a brand new, novel industry in digital assets with 50-, 60-, 70-, or 80-year-old laws. So, how do we create new laws and not try to regulate something novel with antiquated regulations?
Many financial services executives have articulated that a huge part of their business plan is educating their regulators. That means going to sit down with their regulators, telling them exactly what they're going to do, how they're going to do it, showing them their risk-management protocol, show that they understand the space, and laying out to them a model of why they should trust them.
There are solutions out there for the community banks and CUs that they feel are pretty safe: Bitcoin only, off-balance sheet, etc. However, there are pros and cons to that and that's what I work with our clients to weigh. I’ll say, "Tell me where you're trying to get to. Then we'll see if there is a vendor out there that will help you or if you want to design something yourself.” We look at the risks of all of the different strategies — because there is a risk inherent in either choice.
I helped with a strategic plan last week for a bank that created a digital-assets position because they wanted to build something themselves. This person has knowledge and talent to be innovative while understanding the risks. Conversely, there’s a bank right down the road from them and they're not touching it with a 10-foot pole. What’s interesting is that the bank creating their own strategy is extra motivated because of that more conservative bank. The innovative bank will tell you: "That's exactly why we're doing it. We're not thinking about today. We're thinking about the future and our future clients and how we can be a first mover in the space."
This current downturn is going to boot some folks out, expectedly.
But to me, and to many others, the longer-term future of the digital-asset space is still incredibly exciting, due to the inventive nature of the people that are thinking about how to digitize any asset of value. In the bigger picture, we're in the process of leaving an analog world for a digital world, so this just makes sense.
This current downturn may slow down some mass adoption. But that’s not necessarily such a bad thing; it could even make the regulators speed up. There was some fear from the CFTC of predatory practices — those who could least afford to invest in crypto assets were investing because they saw it as a get-rich-quick scheme. But the people who really understand the space know that this will take time. They're going to be in it for the long haul. And I think it's going to rid us of a lot of bad actors. But it's not going to weed out the adventurers and those who look to the future.
When I first was really intrigued by the space, I didn't view it at all the way that some people and markets view it today: as a way to get rich via a speculatory vehicle. Instead, I was intrigued by how this was going to revolutionize payments. How was this going to revolutionize truth and transparency? Many just think about what's making headlines, as opposed to the amazing technology all throughout the crypto and DeFi space. Will there be things that come and go? Of course. But the technology is going to evolve and decentralization is the most revolutionary thing that's come out of all of this.
We have a hard time wrapping our heads around something totally novel and inventive. All of this innovation combined is a gamechanger. If you start adding in the different layers, how the technology has evolved, what is going to happen with the different protocols, what's going to happen with the different platforms, what's going to happen with the different use cases of the technology, and then use the technology to allow for an exchange of value, it's just so powerful. It will be interesting to see how this all evolves.
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