Yan Zhao, President, NYDIG

As digital assets and traditional finance continue on path towards mutual integration, many companies from across the financial landscape have begun setting up the infrastructure to help large scale financial institutions offer crypto-enthused financial products and services. As a bitcoin and digital assets company that offers technology and financial services for institutional investors, NYDIG is a major player in the widespread incorporation of crypto-infused banking. 

The company is in the process of launching its Bitcoin savings plan, a B2B financial product that would allow individuals to directly invest in digital assets via their already existing mobile banking apps. Yan Zhao, President of NYDIG, spoke with deCashed at the New York Stock Exchange last week about this new product, cryptocurrency’s role in the future of consumer banking, and how the notion of widespread use of digital assets at a consumer level is much closer than it may appear. 

“The genesis here is really there’s this whole trend about getting paid in Bitcoin,” said Zhao, when asked about the most immediate impact digital assets have in traditional finance. Discussing NYDIG’s ‘Bitcoin savings plan’, she spoke about the idea of not just getting paid in digital assets, but how companies like NYDIG are providing legacy banks the infrastructure to give their customers digital asset buying power via the bank’s own platform. 

“Let’s say five percent [of a paycheck] every month, allocate it to a bank account that is powered by [another fintech] with our front end, and every time that cash hits a bank account, it automatically converts it to Bitcoin,” said Zhao. “So you set it, forget it, and you never have to worry about it, and every month you accumulate a little bit more. We call it a savings plan because it is a savings plan. Save away for a rainy day in an asset class we believe in, in a way that is secure and easy to access.”

Zhao highlighted two key components to any successful financial product, simplicity and efficiency. She used these two principles in an explanation of why NYDIG’s Bitcoin savings plan is a no-brainer for banks looking to incorporate digital assets. “You don’t have to download a whole new app, you don’t have to upload your selfie, you don’t have to wait and transfer money back and forth, it’s all right there.”

When asked about how digital assets can be incorporated in traditional finance, Zhao spoke on how many institutions have already incorporated crypto-induced ideas via fintechs into their suite of potential products. 

“Fintech is all about making financial services safe and accessible in a safe and secure fashion, [accessible] for more and more people, all while making it easier, cheaper and faster,” Zhao said. “How we approach [ideas] from a digital asset perspective is we ask ourselves, ‘how do we give access to bitcoin and digital assets in ways that are faster, cheaper, more integrated with how people live their lives’?”

Inside all this innovation through implementation of new and improved financial products, Zhao is well aware of the government’s lack of regulation when it comes to crypto’s recognition as a legitimate part of the US economy. According to her, NYDIG is ready for the feds to step in to the space, as the company has been abiding by the laws in place outside of crypto as a basis for possible regulations that are to come. 

“People say crypto is so unregulated, and you know, that’s not actually true,” said Zhao. “There are financial services for things like ‘what is a security’, and ‘what products can you offer to retail consumers?’ Regulation is out there. Even though those regulations don’t literally say the word Bitcoin, we believe from the very beginning that you can analogize that if you’re offering a financial service, which Bitcoin is, it’s a financial product.”

Zhao embraced specific regulation on digital assets, and reiterated that regulation would not be detrimental to her company’s business model. “Of course, there could be regulations that come out that are going to be more specific and we welcome it, we think it’s going to be fantastic. In the meantime, we’ve really taken a practical approach to this and that’s how we’ve done things, so we feel very comfortable with that approach.”

With New York etched in the company’s acronym, Zhao spoke about the city’s future role as the financial hub of the world. When asked about being a New York-branded company in an industry that is currently playing tug-of-war with where its geographic focal point will be, Zhao believes that New York can outlast cities like Miami and Austin in the race for modern finance’s longterm landing spot. 

“I think innovation can happen in lots of different places all at once, and frankly we welcome innovation no matter where it is, so I think it’s better for the entire digital asset economy,” said Zhao. “As a proud New York company, right now it feels like digital assets and crypto are so much different than traditional financial services, I think that it’s because it’s still relatively new.”

Zhao gave a prediction on the future of both New York as a financial hub and the merging of crypto and banking in one swoop. “I expect traditional finance and crypto currency industries to exist harmoniously together, deeply integrated in a lot of ways, for example being able to buy bitcoin through your banking app,” Zhao continued.

“As long as financial services are a big part of the world,” I think New York is going to remain a big part of the financial world.”

Federal Reserve Chairman Jerome Powell spoke about cryptocurrency regulations in a House Financial Services Committee meeting last week, giving credit to the Russia-Ukraine war as a highlight for the need of regulatory oversight in digital assets.

“[The Ukraine-Russia conflict] underscored the need for Congressional action on digital finance including cryptocurrencies,” Powell said. “We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there.”

Powell spoke to the committee about potential detrimental uses of crypto. He referred to “malicious actors” and “terrorists” as some of those who use digital assets to commit crimes, on top of crypto’s potential to allow Russia to get out of the barrage of international sanctions but against their fiat currency, the Ruble.

“This will be something that we will invest a fair amount of time and expertise … to get it right,” Powell said, emphasizing that “we have not decided to do it.”

“We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there,” said Powell. “It was probably no different with railroads or telephones or the internet, and ultimately what’s needed is a framework, and in particular ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist finance and just general criminal behavior.”

Cryptocurrency is one of the last resorts the Russian regime has left to save their economy. They have been cutoff from western markets and have been removed from SWIFT, the international payments system that facilitates cross border transactions.

Democratic Senators wrote on Wednesday to Treasury Secretary Janet Yellen, in an effort to vocalize concerns that the use of cryptocurrencies could be a loophole around international monetary sanctions against Russia.

“These concerns have become even more urgent given the sanctions imposed on Russia after its invasion of Ukraine,” Sen. Elizabeth Warren alongside other democrats wrote in their letter to Yellen.

Rumors have swirled about the Biden administration announcing some type of government system when it comes to the regulation of digital assets. No such announcement has come about.

SoFi, the nation’s newly chartered bank, added 25 new cryptocurrencies to SoFi Invest in 2021. The company now touts “thirty available coins” on its website.

Despite calling crypto a growth product in the Q4 earnings call, there was no mention of it in the year-end investor presentation.

SoFi Invest competes with Robinhood. Touting that anyone can get started “with just $10,” the company advertises that the cool part about crypto is that it can be traded 24/7.

“Weekends, holidays, middle of the night-no time is off limits,” the company says.

The service is a profit center for SoFi, who charges a markup of up to 1.25% on crypto transactions. Users are not permitted to transfer their crypto to external wallet, however.

“We take security seriously at SoFi Invest and by having a closed system we can better secure your crypto assets,” the company’s website states. “In the future, we may consider adding the ability to transfer crypto into or out of your SoFi Invest account, but it isn’t a planned feature at this time.”

Wedge, a ‘smart’ debit card that lets users pay for everyday purchases with any asset, announced a strategic partnership with Sila Inc., a  fintech software platform that provides payment infrastructure as a service. The partnership between the two companies adds a new and improved layer of speed and safety for Wedge customers.

“The integration with Sila puts Wedge in a position to scale our offering and change the way people think about daily spending,” said Billy Roberts, CEO of Wedge. “Instead of moving money around on antiquated and expensive ACH rails with limited capacities to ledger funds between digital wallets and hold funds for our users, Sila allows us to move funds more safely, more quickly, and at a much better scale than competitors. And our users benefit with more robust and reliable digital wallets where they can securely hold cash.”

While Wedge’s executives spoke of their product changing the infrastructures of spending for an everyday consumer, those from Sila spoke more broadly, highlighting innovation’s impact on the larger financial landscape.

“Fintech is changing the way people spend, save and move money,” said Shamir Karkal, co-founder and CEO, Sila Inc. “Sila is supporting companies that work on what’s next in the payments space.  Partnering with Wedge, we created a vision for how smart spending solutions can really look at scale. We’re excited to bring our companies together to achieve this innovation.”

Wedge changes how consumers use their assets. Things like stocks, ETF, and cryptocurrencies are enabled for use in everyday purchases. Wedge claims to “put money to work in the markets without sacrificing liquidity.” According to them, this model allows their customers to capitalize on market movements any time they make a purchase.

The concept of actively spending investments is not new. Robinhood, one of the world’s largest digital trading platforms, has begun sending its users debit cards.

Regulators have been historically weary of companies that provide bank-like services but aren’t regulated as such. As digital assets become more accepted both domestically and abroad, it’s likely to see crypto-payment mergers moving forward.