The Widespread Reach of Blockchain
“A typical financial asset has a set of cash flows, and its value is driven by the future expectations of those cash flows. Cryptocurrencies do not have cash flows,” said Nataliya Manina, an attorney in the financial services industry, about why she was at first skeptical of cryptocurrencies. “Digital assets' values are not backed by sovereign credit. You cannot apply traditional valuation mechanisms to cryptos, as their value is mostly driven by something different: developing useful application-cases for blockchain.”
Nataliya Manina is an experienced lawyer with a diverse background in the legal and compliance fields as well as in-depth knowledge of start-up organization structuring. After graduating with a law degree in her home country of Belarus, she went on to receive her MBA, Series 3, and a Master of Laws from Northwestern University. She has held roles at the CME Group, National Futures Association and G.H. Financials before dipping her toe into the digital asset space.
"I started to read a lot about blockchain and the legal implications of cryptocurrencies when my friends and I entertained the idea of organizing an ICO," she said. "The idea was to structure the coin so it is tied to a benchmark, but it is not a security and that was a difficult task to accomplish, because of the Howey Test."
From skepticism to a career in digital assets, Nataliya ended up working at a lending institution that used bitcoin as collateral for loans.
"I met a variety of entrepreneurs and learned a lot about blockchain technology, regulations and trading opportunities," she said. "This experience led me to a few interesting projects that focus on cryptocurrencies trading and technology. They are in early stages but I see great potential."
And it is the potential of Blockchain that attracts most people.
"Start-ups in this space are developing useful application cases for cryptocurrencies and blockchain," she said. "I also see great arbitrage trading opportunities in crypto derivatives markets that no longer exist in traditional markets."
She started talking about how the legal industry could be more innovative and efficient if they leveraged blockchain technology.
"When it comes to crypto applications, smart contracts on the blockchain can create an opportunity for the legal industry to become more inventive," she said. "Code is becoming a law, and blockchain is turning into a legal code. All standardized contracts, such as an ISDA Master agreement for example, can be put on a blockchain, which would reduce negotiation time and costs."
Nataliya also mentioned the enormous amount of time and resources that financial institutions spend on the Know Your Customer (KYC) process when a customer opens an account.
"The includes exchanging documents back and forth between a prospective client and a financial institution," she said. "All that customer data can be added on the blockchain and can be validated and exchanged in an easier way that reduces time and costs when opening a new account."
Another example she talked about was the clearing and settlement process in derivatives trading.
"Blockchain can provide greater transparency and reduce errors that typically go hand in hand with any partially-automated and to some degree manual process, even when a system of internal controls is applied," she said. "I see blockchain-use in any kind of reporting to regulators and investors. The financial statements of publicly traded companies can be put on a blockchain, and overall, most of the accounting can be done via blockchain."
She also mentioned some fun things you can do on the blockchain.
While Nataliya sees promise and potential with blockchain, she would be amiss not to mention some of the challenges this new technology poses as well.
“An owner of a crypto exchange can die, taking with him the private keys to the exchange's cryptowallet,” she said, referring to the QuadrigaCX case. “Or a regulatory definition of a certain cryptocurrency can change, altering the legal environment around existing models.”
In the end, Nataliya has a lot of respect for people venturing into this space and believes the repercussions will be widespread.
“My role models are the entrepreneurs that have accepted the challenge of working in the unknown and are not afraid of dealing with these new and inconsistently-defined financial assets,” she said. “I admire people that see potential where other people do not see it. More and more firms are currently joining this space. Some companies will fail, but those that survive will change the business models in all types of industries."
*Information on third parties (including their views and opinions) or links to external sites should not be construed to be an endorsement by Hehmeyer Trading + Investments.