Blythe Masters, the former JPMorgan executive who helped pioneer credit derivatives in the 1990s, has re-emerged as chief executive of a cryptocurrency start-up.
Digital Asset Holdings aims to be a venue for buyers and sellers of financial assets to meet and transact, switching currencies into bitcoin in order to cut the cost and time of settlement and make use of the decentralised “block chain” as a secure record of transactions.
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Bitcoin was created in the wake of the financial crisis by an anonymous computer scientist keen to displace central banks, government currencies and the traditional banking system.
Its most ardent devotees include libertarians and drug dealers, but financial services companies are interested in exploiting the underlying technology, which allows the ownership of a bitcoin to be transferred from one user to another.
“There is a school of libertarian ‘visionaries’ who want to imagine a world without big banks, big governments,” said Ms Masters, who left JPMorgan last April. “That’s nice, but completely irrelevant to this business model. We don’t imagine a world in which big banks and big governments don’t exist.”
“They say they want the world to change, but the world will change by adopting new technology to do a better job,” she said. Reducing the frictional costs of financial transactions is “one of the great challenges of our time”.
Ms Masters said she had held discussions with the Federal Reserve, the Bank of England and New York’s Department of Financial Services about the venture, though it would not need regulators’ blessing because it was not an exchange, a custodian or a money transmitter.
Instead, it will admit creditworthy members — such as big banks and asset managers — to trade between themselves using DAH’s technology.
Ms Masters would not say how much she had invested, nor when the venture would launch. DAH was founded last year by Sunil Hirani, founder and chief executive of trueEX, an exchange for interest rate swaps, and Don Wilson, founder and CEO of DRW Trading, a proprietary-trading firm.
The venture has employees in New York, Chicago and Tel Aviv, a cryptocurrency hub.
There is a school of libertarian ‘visionaries’ who want to imagine a world without big banks, big governments. That’s nice, but completely irrelevant to this business model
- Blythe Masters
Ms Masters, 45, is best known for a diverse career at JPMorgan, where she was instrumental in the development of the credit default swaps market as a young banker. Latterly she was head of the global commodities business and left when the bank sold it last year for $3.5bn.
A handful of existing companies, including Ripple Labs, are attempting to achieve the same aim, though all have different technology.
“We feel that some of the basic plumbing is missing in the system,” said Mr Wilson of DRW. “Bridging the gap between bitcoin and other cryptocurrencies and traditional currencies is a problem. One settles immediately. One settles over a day or more than a day. Participants in this ecosystem will be able to control who they’re transacting with because it’s within a closed system where we can control who’s in the pool.”
Banks have an ambivalent attitude towards bitcoin — intrigued by the technology but concerned about its negative associations.
BBVA, the large Spanish bank, has invested in Coinbase, a bitcoin “wallet”. But other banks have stopped providing services to bitcoin companies, citing their riskiness. Daniel Masters, ex-husband of Blythe, complained last year that his regulated bitcoin investment fund had been cut off by HSBC.
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Digital Asset Holdings aims to be a […]