Faced with the FTX disaster, Finoa founders are bombarded with demands for custody of crypto assets.
Because clients in institutional and professional investor circles do not feel secure with their previous setups in the current market situation. Will the wave of money for the crypto sector, which is often touted in 2021, still come? Finoa co-CEO and co-founder Christopher May talks about it with us.
With each crash, the influx of funds and therefore mass adoption is postponed for two years,” explains Christopher May, classifying the situation. Additionally, the entire blockchain industry is missing a critical success factor. Which is – more on that later. First, we ask who Christopher is, how Finoa came about, and what the platform is doing to drive mass adoption.
The way of Finoa – mass adoption requires simple handling
Christopher May was already experimenting with over 80 tokens in his private wallet in 2017. To categorize: at that time, exchanges like Binance only offered 15-20 crypto assets. In order to build his diverse crypto portfolio, Christopher had to service around 20 platforms at the same time, which led to an opaque jumble of keys and passwords. Managing the private wallet alone consumed time and nerves through different and sometimes complicated registration, deposit and purchase processes. The circumstances triggered a “pain” that Christopher wanted to serve:
“Crypto-assets need to be easier and better to manage!”
When Christopher then did his MBA with his McKinsey-era colleague, Henrik Gebbing, his fellow students refined the approach. Between 2018 and 2019, the vision that drives the two founders of Finoa to this day was born:
“We offer professional and institutional investors as well as institutions a platform for managing their crypto assets” Christophe sums it up in a few words.
The reason for choosing the target group is the realization that at the time of the idea only about 20% of cryptocurrencies were in the hands of institutional investors. If we look at the traditional financial sector, we see the opposite: around 85% of assets are held by institutional investors. Thus, the two sensed a market with great growth potential and founded Finoa.
“In the meantime, our concern is to offer institutions secure access to Web 3. We therefore see ourselves less as a bank or a broker and more as an access point for institutional organizations in the decentralized Web 3 space” , explains Chris about the evolution of the business model.
What sets Finoa apart from FTX, Celsius and Co?
Now let’s listen: what’s the difference with the centralized business models à la FTX and Celsius, which have damaged the reputation of the crypto industry so much?
First, the aforementioned crypto service providers also talk, or have talked, to retail customers. Finoa offers services specifically aimed at professional investors and institutions. And they often have to work with regulated administrators. Because the Security is the top priority for these investors, this is where Finoa is focused.
Regulated under 64y KWG, Finoa also only offers access to selected tokens and apps. Here, Finoa works closely with foundations and DAOs to be able to make a meaningful assessment.
Key custody is extremely important to guests. And this is exactly where the most important difference between Finoa and failed business models lies. Christopher explains it in a very catchy way like this:
“We do not store our clients’ assets in a so-called omnibus wallet, but each client has their own wallet for each individual channel. We can thus natively prove proof of deposit per customer on the blockchain.
Because each client has the public key to their wallet, they can see where the assets are. We never own the assets. And that’s why we obviously can’t do “harm” with customer funds. This led to the demise of centralized providers like FTX and Celsius. These providers were no longer custodians of assets, but speculated on clients’ assets. This is not possible with us.
As a custodian, we provide the infrastructure to facilitate custody of the keys and therefore of the assets. It is extremely important to make clients understand the difference between a custodian like us and an exchange like FTX.
Has the crypto industry blocked the way to mass adoption due to breach of trust?
In short: no, but…
Let’s first address the critical success factor for mass adoption mentioned at the beginning: use case ! According to Christopher, we can only expect institutional adoption of crypto and blockchain values when applications are used in the real world. There must be a good decentralized exchange that is regulated and shows users that it runs services faster, cheaper, and safer.
“During the hype of 2021, investors paid little attention to what was under construction. For example, the tokenization of rights – or other things – could create value for institutions. It will certainly take at least another two to three years. Regulation will also play a role in this and developments such as MiCAR are useful for mass adoption,” the CEO envisions.
“But with each crash, the influx of funds shifts two years. The best example is provided by the German banks, which not only once announced the entry into crypto custody, but also backed down. Crashes shut down investment funds and banks, while venture investors such as hedge funds, venture capital funds or family offices, especially from the US, have already ventured into crypto” , explains Christopher.
“Many people have also got involved on the private investor side, as shown by fintech providers such as Revolut or Trade Republic. Now, the trend is moving away from investing through the broker towards decentralization. Decentralization on the retail side is becoming more important and customer education needs to be adapted accordingly. This is the silver lining of breach of trust crashes – users wonder why it happened and if it could happen in a decentralized setup as well.
Finally, Chris highlights the young age of the blockchain and crypto industry. There is still a long way to go towards mass adoption and we must give ourselves this time. DeFi and traditional finance will likely coexist for a long time to come until DeFi apps are easy to use and ingrained in the minds of users. So it remains exciting in the crypto space that has come to stay.
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