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Seattle Bank: Banks and Crypto – The Smart Way for FIs To Enter the Market

As two of the most prominent players within financial services, it seemed inevitable that banks and cryptocurrency would eventually come together, however, integrating the two is a process not without its risks.

Josh Williams, Executive Vice President, Chief Banking Officer and Head of Partnerships, at Seattle Bank
Josh Williams

Here, Josh Williams diligently details why the attention of the banks has fallen upon cryptocurrency, and how said banks can indulge in the technology without getting their finances or hands scolded. 

Williams is the Executive Vice President, Chief Banking Officer and Head of Partnerships at Seattle Bank.

He joined Seattle Bank in 2014 and now leads Partner Banking, collaborating with fintechs, marketplaces and brands to integrate financial services into their customer experience.

Always aiming to advance his clients’ progress toward their financial and business goals, Williams directed the development of Seattle Bank’s private and commercial banking business lines designed for ultra-high-net-worth families and closely-held businesses.

He has over 20 years of experience, serving as a resource to clients with complex banking needs, building and leading successful teams, and formulating and executing organisational strategies.

Technology investment and innovation are central to Seattle Bank’s business strategy. In early 2020, the bank became one of a small number of financial institutions nationwide to convert to an open-API, cloud-based tech platform.

As a member of the leadership team, Williams helped lead the digital transformation in client experience and Seattle Bank’s development partnership with Google for the Plex Account.

He now heads Partner Banking, including embedded banking and banking-as-a-service solutions, to enable fintechs and non-financial companies to offer flexible payment, credit and deposit services to their customers.

Prior to joining Seattle Bank, Williams held leadership positions at Wells Fargo, most recently as Senior Global Banking Consultant. Williams earned a bachelor’s degree in economics and political science from Macalester College and a master’s degree in business administration from the University of Washington Foster School of Business.

What a difference a decade makes.

Back in 2009, when cryptocurrency burst onto the financial scene as the bold and brash ‘new kid on the block’, its introduction was met with confusion and scepticism by the general public and industry insiders alike. Initially dismissed by the Jamie Dimons of the world, it wasn’t to be taken seriously. ‘Terrible and ‘a Ponzi scheme were some of the more charitable words critics used to describe it at the time.

Today, crypto is considered so mainstream that once-reluctant institutional investors are pouring billions into the space, while A-list celebrities like LeBron James and Larry David promote it in multimillion-dollar Super Bowl ads. Meanwhile, individual investors are taking notice: A CNBC survey found that one in 10 investors currently include crypto in their portfolios.

As a new wave of investors tries their hands at crypto, not surprisingly, more financial institutions are looking to merge onto that high-speed crypto highway, too. To fully capitalise on investors’ interest, banks can offer their customers something that is hard to find on the crypto landscape: a reliable pathway to investing in cryptocurrency that serves as a safer alternative than trying to go it alone.

Serving crypto investors effectively requires adopting a smart approach when considering the inherent complexity and volatility of the market. Financial institutions have to deftly navigate an ever-fluctuating landscape by devoting time to extensive market research and weighing the benefits and perils of doing business in the crypto world.

At Seattle Bank, as we charted a cryptocurrency investment solution for our clients, we determined that successfully establishing an offering means addressing three essential priorities:

Understand the risks

Before charging full-throttle into the crypto arena, there are three main risk factors financial institutions should prepare to help clients manage:

1. Volatility of the market

Crypto is not for the timid. As an investment option, it’s historically volatile, and these past few months have been no exception, with the total crypto market losing over $1trillion between November 2021 and January 2022.

Of course, high risk can mean high rewards, making crypto attractive to both new investors with an appetite for experimentation and veteran investors looking to ensure relevant exposures in their portfolios.

Still, regardless of an investor’s level of experience, only those who can afford to lose—and lose big—should be entering the market.

2. Securing custody

Another concern is the ongoing risk of private keys or crypto wallets being hacked, stolen, or lost. Establishing an iron-clad custodial system – the ability to safely purchase, hold, move, and store the crypto – will solidify consumer confidence.

3. Managing the money-laundering threat to consumers and our overall financial system

The surging popularity of crypto notwithstanding, bad actors are always out there. In fact, its popularity may be emboldening them. A recent report of a conspiracy to launder $4.5billion in stolen crypto by hacking into a virtual exchange hammers home how the market can leave investors and FIs vulnerable.

Choose your partners wisely

In an interconnected financial ecosystem, it’s hard to do anything alone – and that’s especially true when it comes to crypto.

Among their many strengths, FIs have the expertise to manage complex financial products, handle anti-money laundering assessments, adhere to market regulations, and transfer custody of financial assets.

But the mercurial nature of crypto adds another layer of complexity to each activity. That’s why it’s best to partner with a knowledgeable, reputable crypto company that can manage the complicated back-end process to ensure regulatory compliance and an exceptional level of security.

Seattle Bank proactively addressed these issues by partnering with NYDIG, a purpose-built crypto company whose platform meets the highest security, regulatory, and operational standards.

The process involves NYDIG going out to cryptocurrency exchanges, purchasing the currency, taking the keys offline, and storing them in a secure, vaulted location.

Narrow your focus

While it may be tempting to maximise profit by presenting an array of crypto product offerings, a measured approach will protect customers from the riskier aspects of this type of venture while also allowing the bank to learn as the crypto market matures.

Such an approach will also prove valuable as regulatory guidance evolves, as federal officials last year promised it would. Adapting to new rules is much easier to do with a simpler product. However they design their products, financial institutions should still consult with compliance experts and their regulators.

At Seattle Bank, we’re narrowing our approach in two key ways: by focusing on cryptocurrency investment rather than transactions, and by limiting our offering on Bitcoin, which is the only cryptocurrency currently designated as an asset by the SEC.

Additionally, as with our current private banking offering, Seattle Bank is also mitigating the risk of investors suffering catastrophic consequences by offering the solution only to individual accredited investors – customers who have the means and acumen to avoid financial ruin each time the bottom falls out of the market.

Given that most transactions today are digital rather than cash-based, crypto is the next logical step in currency evolution and is well worth exploring for financial institutions. That said, crypto is still a relatively new frontier, and banks that enter the fray should do so with their eyes wide open to the risks relative to their roles as fiduciaries.

For investors, a risk-management approach to crypto can enhance the appeal of working with a bank – it empowers them to brave this volatile terrain with a trusted institution by their side.

Though it’s not possible to mitigate every potential downside of cryptocurrency investing, banks’ safeguards, industry expertise, and smart partnerships can provide investors with a relatively safe harbour while minimising institutional risk.

About Seattle Bank

Seattle Bank is a boutique bank focused on the needs of individuals, families, businesses, and community organisations in the Pacific Northwest.

Its team of bankers blends big-bank solutions with boutique-bank service — creating more value by aligning tailored financial resources and services to match each client’s needs.

Through a combination of customised solutions, exceptional service, and accelerated answers from local decision-makers, it aims to make the complex simple.


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