Albert’s background:
I’ve been a career regulator, spending nearly 25 years supervising and regulating financial institutions. Most of that time was with the Wyoming Division of Banking and for the last 10 years of my career, I was the Banking Commissioner for the State of Wyoming.
Over the past four years, Wyoming stood out among the states in the digital asset space by providing legal and regulatory clarity for digital assets. This included creating a new state bank charter to serve as an on/off ramp for crypto into the financial system and act as a custodian for digital assets. My office also created the first of its kind supervisory manual for digital asset custodians. All of these actions garnered a lot of attention for Wyoming and the Division of Banking. It also gave me and some of my staff the opportunity to meet a number of incredibly smart and innovative people from all around the world. Which, by the way is why I love the digital asset space, problem-solvers abound and they are excited about the opportunities this space offers!
Q: Looking at the audience, the founders, the developers that are working with all of the widgets, APIs tools that you guys have set up, what are some of the key regulatory issues for these innovators that they should have in mind? What are some of the key areas that you want to emphasize to the audience?
As you know, the role of a custodian is to keep assets safe. And there’s a few key components of that. One is the actual security of the asset itself, the private key management and making sure all of that is done properly.
But the other part is making sure that it’s done in a compliant manner, that the custodian is doing everything that they need to do to follow the rules and regulations as they’re set forth. Which, that issue in and of itself is another issue. That is, whether the laws are modern enough to capture that. Nevertheless, we’ll be making sure that the customers that come into the trust company will enter in a compliant manner. But we’ll be doing it in a more frictionless manner, making the onboarding and the user experience better.
I think each iteration of the technology does allow for that, but KYC is still KYC. And there’s still always going to be a part of it that isn’t easy and feels intrusive. But our goal is to do that in a way that hopefully takes some of the pain out of it.
And there is innovation outside of the trust company that we all will benefit from: the wallets, the minting engine, things like that. Since those are outside the trust company, it gives us a lot more flexibility and more ability to innovate. There is always concern about the integrity of the code that’s being written and that it’s not able to be manipulated. We continue to read about smart contract manipulations and various things like that. So my hope is that as we continue to build that out, that we can address any potential security weaknesses before we launch. And I know that we will.
Q: Looking at the audience, the founders, the developers that are working with all of the widgets, APIs tools that you guys have set up, what are some of the key regulatory issues for these innovators that they should have in mind? What are some of the key areas that you want to emphasize to the audience?
As you know, the role of a custodian is to keep assets safe. And there’s a few key components of that. One is the actual security of the asset itself, the private key management and making sure all of that is done properly.
But the other part is making sure that it’s done in a compliant manner, that the custodian is doing everything that they need to do to follow the rules and regulations as they’re set forth. Which, that issue in and of itself is another issue. That is, whether the laws are modern enough to capture that. Nevertheless, we’ll be making sure that the customers that come into the trust company will enter in a compliant manner. But we’ll be doing it in a more frictionless manner, making the onboarding and the user experience better.
I think each iteration of the technology does allow for that, but KYC is still KYC. And there’s still always going to be a part of it that isn’t easy and feels intrusive. But our goal is to do that in a way that hopefully takes some of the pain out of it.
And there is innovation outside of the trust company that we all will benefit from: the wallets, the minting engine, things like that. Since those are outside the trust company, it gives us a lot more flexibility and more ability to innovate. There is always concern about the integrity of the code that’s being written and that it’s not able to be manipulated. We continue to read about smart contract manipulations and various things like that. So my hope is that as we continue to build that out, that we can address any potential security weaknesses before we launch. And I know that we will.
Q: What are your thoughts on some of the current events, looking at the Terra ecosystem and Luna?
Well, a couple things, one, there’s a lot of noise still out there. There’s been a lot of noise in the crypto markets for a few years now surrounding the alt coins and which of those are junk and which ones are proving out to be new tech or a new code or some use case. I personally have some concerns with algorithmic stablecoins. You’re starting to see some of the weaknesses, in that anything that’s early is going to be sort of the trailblazer. They won’t be perfect, but it will help hopefully for the next iteration.
I think a stablecoin should be backed by a fiat currency and that fiat currency should be held in trust by a regulated bank or trust company to ensure that funds backing the stablecoin are protected and available for redemption. That’s one of the answers that we solved for when I was in Wyoming: allowing for a mechanism that would provide for real-time verification of reserve backing a fiat backedd stablecoin. But my own personal feeling on algorithmic stablecoins is that we’ve got a ways to go before I’m comfortable with them.
Q: What are other key concerns & key issues that are on the horizon?
I think in the digital asset space – whether you’re talking crypto, digital securities, or tokens – the laws and regulations are always going to lag behind innovation and the tech.
If you really want widespread adoption and recognition of an asset class, you have to have some type of a regulatory structure around it. Now that does mean using 30, 40, 50 year old laws to govern new innovations and new technologies, but until those laws are revised and modernized your stuck with them.
There’s always going to be friction between innovation and compliance. Nevertheless, I think companies like Fortress Trust will continue to provide products and services in this space that can allow us to have a regular dialogue with regulators.
In the digital asset space, many continue to ask how will regulators provide an adequate regulatory environment? How do they supervise this? Well, while I was Banking Commissioner in Wyoming we came up with the nation’s first regulations around digital asset custody. And then as the administrator of the law, we developed a supervisory manual.
Q: Why did you decide to go into private practice and why Fortress Trust versus a traditional bank?
Part of it was the initial team at Fortress Trust, their proven track record for building blockchain infrastructure and our shared vision for the future of finance. Some of the team members I’ve known for many years so I’m very comfortable with them. And I’ve been able to build out the team further. I’ve got a former deputy commissioner from Wyoming, whom I have worked with for over 20 years, coming on board here. This is in addition to the other former regulator that I worked with for over 12 years and was also in the Division when the new crypto bank charter was being created. So we’re going to have an extremely strong regulatory foundation, which I know sometimes can be a little unnerving because you can imagine the conservative nature of professionals like us. But our goal is to maintain a well-balanced regulatory perspective, while still being innovative in our approach.
I do believe that NFTs will continue to evolve. You’re going to see more than just the collectibles, music, and artwork, which all have a great place here. I think you’re going to see real assets being tokenized. That’s where I see a lot of potential. And I think that Fortress Trust will be positioned to evolve with those sectors as they grow.
Q: What are some of the other sectors/different verticals that can utilize everything Fortress has to offer? How about museums, universities, creators and innovators? What are some of the other spaces? How are other ways that you could see adoption taking place in the years to come?
I think once you get the laws to allow for it, if you think about real estate, how you buy a house today, or even a car, there is opportunity.
Then think of commercial real estate projects. If you’re doing a very large commercial real estate project, it’s extremely complex financing. There are ways to invest in it, but it’s not easy for your average-Joe investor if they wanted to add that asset type to their portfolio.
If you tokenize that you have the ability to open up that market to a pool of potential investors. And you also give financing options to those that are engaging in development.
I also believe that digital securities issuance will continue to grow.
Q: One of your unique selling propositions that ties into that is “end to end” blockchain infrastructure. How does Fortress Trust tie into that? What does it mean for compliance? You mentioned the KYC, you also talked about sanctions screening and monitoring everything from custody, to royalty escrow, to fraud mitigation. How does Fortress provide more, save time, and mitigate potential losses for any innovators that are associated with Fortress?
Well that is the goal; if someone says, okay, I don’t want to hold this asset on my device, I don’t want to have an un-hosted wallet, then we will have that solution at the ready. Or as I mentioned, if your NFT project is deemed to be deemed a security at some point, you’re going to need a custodian to manage that project.
Let’s say you’re an artist and you just want to engage with your fans. Or you’re a company that wants to have some sort of an NFT strategy, but you’re not a financial services institution. So we will provide that service if they need it.
What if I’m holding a high value NFT and I pass away? Well, if it’s on my wallet that no one else has access to, that’s gone. As a custodian, there’s ways to allow that asset to pass on to your heirs.
Fortress Trust will definitely support and allow business to be fed into us from our affiliates, Fortress Wallet and Fortress NFT. But we’ll also have the ability to set up a digital asset IRA, and other custody solutions for other digital assets.
So, what does this world look like two years from now? We’ll have a broader adoption of digital assets. I think there’s going to be a lot of disruption in the financial services sector. There’s going to continue to be things that cause people to have a little bit of initial concern as this space moves towards equilibrium. But I also think that the opportunities are really endless around the digital asset space. And if companies aren’t thinking about how to incorporate some of those strategies, they will get left behind quickly.
