Christine Boggiano, an attorney and co-founder of the digital asset exchange CrossTower, developed her idea to protect the vulnerable when she worked and lived on Amazon in the 1980s, helping to fight for the rights of the Kofani people against Big Oil.
She then worked on the creation of mortgage derivatives on Wall Street, before exotic derivatives became partly responsible for the global financial crisis. Since then, she has used her knowledge as a regulatory advocate to help shape market reforms.
Partly due to the global financial crisis, institutions were slow to accept bitcoin in early 2010, she says.
I discovered [bitcoin] from a lawyer’s perspective, because my clients wanted to buy and sell it. I had to figure out what it was and how to trade it, she recalls of the early days of the cryptocurrency markets between 2011 and 2013.
At the time, their clients were not ideologues, but institutions that saw opportunities in arbitration. They had no philosophical desire to change the world with Bitcoin. They considered it an asset class in 2011 and 2012. One of those clients was Western Union, the financial services company he represented.
But bitcoin soon suffered the collapse of its main exchange, Mount Gox, and the notorious arrest of Ross Ulbricht, who ran the darknet exchange Silk Road.
After the Silk Road and Mt. Gox had taken place, the involvement of institutions became questionable from a fiduciary standpoint. They don’t want to get involved in illegal activities.
Seven or eight years later, the institutions are fully operational again. Boggiano believes that proper regulation in the name of security and the rule of law is critical to integrating the cryptocurrency industry with the proper authority. Just as the people of Cofane in the Amazon needed environmental rules to protect their land from oil spills, she believes retailers also need strict rules to protect them from financial harm.
@crosstower_ex Co-founder and CEO, @KristinBoggiano joins @JillMalandrino on @Nasdaq #TradeTalks to talk about institutional adoption of digital assets, structured products and regulation. https://t.co/nDJXPaS6BM
– TradeTalks (@TradeTalks) January 14, 2021
In addition to serving as president of the institution-focused CrossTower platform, Boggiano is also founder and co-chair of the Digital Asset Regulation and Law Alliance, whose nearly 90 members include executives, legal officers and compliance officers from financial institutions and blockchain technology companies.
Prior to that, she was Chief Strategic Advisor and Senior Regulatory Advisor at Guggenheim Partners, a $270 billion investment firm. The company got new press when its chief investment officer, Scott Minerd, predicted that bitcoin would reach $600,000.
sounds like a small derivative of
Along with her father, who served as a doctor in the Air Force, Boggiano grew up traveling. I’ve lived in Texas, California, Taiwan, New Mexico, New Jersey, Colorado and back to New Jersey, she says. When her parents divorced, she split her time with both of them until she attended Sarah Lawrence College, graduating in 1992.
After writing her dissertation on Texaco’s work in Ecuador and the negative impact of U.S. foreign policy on human rights and the environment in developing countries, she received a grant to travel to Ecuador, where she worked for a law firm advocating for the rights of indigenous people.
I found the Kofan people in the Amazon basin and lived with them for a while, helping them figure out how to take over their land. The problem is that the Ecuadorian government owns the rights to the subsurface oil it wants to extract – often aided by US oil companies.
After two years of fighting for indigenous rights, Boggiano was inspired to go to law school. She graduated from Northeastern University School of Law in Massachusetts in 1997 and received her MBA from the same institution in 1996.
During my internship I became interested in derivatives markets.
In 1995, while still a student, she worked at the Commodity Futures Trading Commission and the Securities and Exchange Commission in New York, which regulate the US financial system.
In the late 1990s, she quickly took a job at Merrill Lynch, trading or structuring equities and credit derivatives for hedge funds and high-net-worth individuals.
I worked 18 hours a day, sometimes seven days a week – it was a crazy deal. Alan Greenspan, chairman of the Federal Reserve, kept interest rates very low, and people were really looking for yield then. So they found creative ways to make products.
I think ’81 was the first transaction, Boggiano tells the Journal, referring to the history of derivatives before they took hold. He is referring to financial swaps, which are derivative contracts that allow parties to swap the cash flows of one asset for another. They were very popular as investors looked for yield after the drop in bank interest rates.
Currency derivatives existed as far back as the early 1990s, she said, adding that equity derivatives began around 1996 but were still in their infancy, and definitions were reissued in 2002. The work in the Chamber of Commerce places the young Boggiano at the heart of the financial revolution of the time.
It all sounds familiar.
In many ways, the description of the world of Wall Street in the 1990s and early 2000s invites comparison with the more recent boom in decentralized finance or DeFi in the world of cryptocurrencies. Cryptocurrencies like bitcoin didn’t initially offer ways to transfer money outside of the hardened zone, but that’s changing now that things like Ethereum 2.0 offer rewards of a few percent per year.
Today, many lenders such as BlockFi and Celsius, as well as several exchanges, including CrossTower Boggiano, offer the opportunity to earn interest income on held cryptocurrencies. In addition, deFi platforms such as Ethereum’s SushiSwap and Binance Smart Chain’s PancakeSwap make it possible to trade cryptocurrencies through liquidity pools. These liquidity pools function as decentralized money pools into which anyone can deposit money, with the depositors then receiving income in the form of trading commissions.
The concept of theFi has been called financial lego and it goes way beyond that. The tokens representing shares in these liquidity pools can in turn be placed on other platforms (or vehicles, as they were called in the early days of Boggiano) to generate returns for agriculture, often generating tokens in new projects that can be purchased immediately or over a few years.
Like the 18-hour day Mr. Boggiano remembers, DeFi’s burglars are certainly skipping sleep to run their factory farms on a number of new platforms. FTX’s Sam Bankman-Fried spends most of his time at his desk in Hong Kong, sleeping on an ottoman.
In 2000, Mr. Boggiano left the trading floor to join a law firm, where he helped develop new products for a new financial ecosystem. It was a wild market. I took credit default swaps on mortgage-backed securities and put them into other instruments, she says.
In 2007 and 2008, the global financial crisis destroyed the market.
After the market collapse, I became a regulatory lawyer and helped shape the regulatory environment before Dodd-Frank [the Wall Street Reform and Consumer Protection Act] and drafted more than 200 rules, Boggiano recalls of a tumultuous time trying to create stability through regulation and oversight.
It may not be fair to blame the tinkers on Wall Street entirely for this greed; after all, it was investors who demanded a return on their capital despite difficult economic conditions when previously high interest rates fell. You could no longer put your money in a bank account and watch it grow steadily. Since the idea that money should be profitable has been ingrained for generations, the development of new and exotic methods to achieve this seems inevitable.
After this crisis, many began to question the stability and even the legitimacy of a financial system that was largely centered on Wall Street.
What made this early derivatives market more respectable than DeFi’s anonymous online casino was that the money flowing in wasn’t the gambling budget of self-appointed degenerates who threw themselves into new performance strategies without critical analysis. Instead, the money was often the savings and mortgages of ordinary people.
Who better to act as regulator than someone who knows this crucial area inside out? That person is Ms. Boggiano, who left the chaos of the auction house and took refuge in the law firm where she worked to help rebuild the system in hopes of regaining people’s trust.
While working as a lawyer, Mr. Boggiano discovered bitcoin in 2011. The major financial institutions she worked with were interested but skeptical.
The level of scrutiny was very high at the time, especially since Bernie Madoff’s Ponzi scheme had just come to light and the industry was undergoing regulatory changes, Boggiano said.
Today, it’s different.
We’re definitely seeing participation and adoption of bitcoin from an institutional standpoint, says Boggiano, who cites Elon Musk, MicroStrategy, Visa and Mastercard, as well as donations from major institutions like Harvard, Stanford and Yale, as recent supporters of the conversion. There is even interest at various national levels, such as in China and the United States, which are working on the yuan and the digital dollar respectively.
I think there is a natural and healthy competition between bitcoin and monetary policy in the US and other countries. This competition is a good thing because it forces countries to think about their economic system.
We will experience significant adjustments and changes over the next three to five years – the economy will be different, she says confidently.
One question that arises is whether some institutions feel they missed out on the cryptocurrency boom, as they were often discouraged from making a move in the early years due to the uncertainties involved. Mr. Boggiano does not consider this a missed opportunity, but an appropriate exercise in prudence. I think they are doing the reasonable analysis they need to do to protect their investors. I think you’ve seen more activity from props that don’t have to report to investors, she says.
I think for institutions, if there’s enough adoption, [if] the number of bitcoin wallets being used is significant, it’s much less likely to drop to zero.
According to Mr. Boggiano, it is important to protect the retail investors who play alongside the institutions. We have a very outdated financial system and regulatory process. I think there is a natural battle between innovation and protecting individuals.
Investments offered to retail investors would be subject to greater scrutiny than those only available to experienced investors, such as institutions and high net worth individuals, as they are expected to have a better understanding of investments and loss management. These safeguards are there to prevent fraud and forgery.
But Boggiano admits: This is primarily a retail asset class, which is very unusual – usually asset classes are managed by institutions.
More regulation, less privacy?
When it comes to bitcoin, I believe there is a moral imperative to develop a medium that promotes privacy while ensuring security, Boggiano says. While privacy is important to her, she believes that protecting individual investors and the general public is a higher priority.
An example of how profitable this system can be came to the fore during the Capitol Rebellion, when investigators tracked down Nick Fuentes, who had received 13.5 bitcoins from a foreign donor. According to Boggiano, this was an excellent demonstration of de-anonymizing bitcoin transactions by tracking digital breadcrumbs in the name of public safety.
Coinbase is one of the companies that would help authorities keep tabs on these digital breadcrumbs by providing cryptographic monitoring services to US government agencies such as the Drug Enforcement Administration and the Internal Revenue Service.
We really need to develop another way to protect people’s privacy and to be able to trace transactions related to human trafficking and drug cartels, because these are unacceptable industries.
In some ways, Boggiano is the opposite of Eric Voorhees, a former Journeys interviewer and Bitcoin entrepreneur who also runs the exchange, who has said that institutions and governments are only there to limit people’s power over money.
While Voorhees’s vision reflects an individualistic conception of unfettered freedom, where collectivist institutions constrain the powerful and ambitious, Boggiano instead describes governments and regulations that were necessary to protect the weak, such as the Cofans in the Amazon who needed environmental regulations to keep their land free of oil waste.
If you let people decide, you get these power imbalances and that can be very devastating for people who are in a vulnerable position, she says.