Bitcoin surge spurs City to recruit crypto natives

Establishments survive by assimilating useful upstarts and excluding dangerous ones. This is the theme of Victorian novels where self-made entrepreneurs became MPs and American heiresses married dukes. It is also a trend in financial services.

The value of unregulated cryptocurrencies has skyrocketed to an estimated $ 2.8 trillion. Regulated banks, fund managers, and consultants are establishing or expanding new digital asset operations.

The City of London and Wall Street are struggling with the fear of missing something. This gives workers in the unregulated cryptocurrency business a route to traditional finance or "TradFi."

An experienced candidate can earn a base salary of £ 150,000 to £ 200,000 a year plus a bonus, said Robert Lycett, a director at M-Wek, a London recruiting consultant. A blockchain programmer can expect between £ 200,000 and £ 250,000 annually. Temporary staff earn up to £ 1,500 a day. Even "a talented and enthusiastic [cryptocurrency] the hobbyist will get a job, "added Lycett.

A skeptical answer would be that banks and brokers are increasing their staff with the force of a short-lived bitcoin high. The flagship cryptocurrency is volatile, polluting, and is sometimes used for illegal payments. It represents approximately two fifths of the estimated value of cryptocurrencies. The world is in a broader asset bubble. When this deflates, Bitcoin could easily collapse.

Wealthy clients would stop criticizing wealth managers for refusing to trade or advise on bitcoins. Bosses bitcoin criticLike JPMorgan Chase's Jamie Dimon, he would feel vindicated.

However, the all-time highs for bitcoin are only part of the story. Bankers say they are investing in digital asset expertise for defensive reasons. They never expect to establish business operations unregulated cryptos. They foresee one day trading tokenized stocks and bonds approved by regulators. "If you are not ready to start the first day, it will be too late," said a contact.

The distributed ledger technology that underpins cryptocurrencies could make regulated transactions faster, cheaper, and more sophisticated. Big banks have been experimenting for years. They have had little impetus to go wholesale.

There are three reasons. First, banks have invested huge capital expenditures in legacy systems that they have no interest in disrupting. Second, there is no reliable legal or regulatory framework for trading digital assets. Third, there is a "collective action problem": the syndrome whereby telephones are useless unless many people install them.

Instead, it has been left to bitcoiners to show that a digital asset can be widely held and traded, albeit sometimes unreliably and with a bad reputation. Therefore, Bitcoin can drive the introduction of government-authorized digital currencies. China already has a limited version of this. The central banks of the EU aspire to do the same. The United States and the United Kingdom are sitting on the fence.

My hunch is that if developed democracies decide to introduce official digital currencies, it would take years. Politicians and central bankers also have legacy systems and oligopolies of power to defend. Regulated digital assets, such as tokenized stocks and bonds, may take precedence.

Meanwhile, most regulated companies are creating staff in areas that do not involve unregulated cryptocurrency trading or investment advice. They look like the cute kid who avoids inhaling when passing a joint at a party.

A recently launched exchange-traded fund by US specialist ProShares has been described as "The first bitcoin ETF". In reality, your exposure comes from regulated futures. Fidelity's retail clients are also unable to purchase bitcoin through its platform, though they can use it to view holdings on Coinbase, a crypto exchange.

Nomura, for his part, does not handle crypto, but has a stake in a custodian that does. Banks including JPMorgan, Morgan Stanley and Deutsche publish research on digital assets. He usually has an observational tone or gives recommendations on crypto company stocks.

It is clear that the financial establishment has tentatively begun to assimilate parts of the crypto experiment that may be useful to you.

Integrating new recruits from that world will be an interesting challenge for managers. For some new hires, cryptocurrencies will continue to incorporate a valid anti-authoritarian belief system as well as a technological fix. They may need to be convinced that Dimon is an industry thought leader, rather than, as some see him, a TradFi non-coiner at the top of a titled asetocracy.

jonathan.guthrie@ft.com