Crypto Layoffs Hit Risk and Compliance Staff at Big Exchanges

Although financial services companies often cut compliance staff during economic downturns – because compliance is usually seen as a function of cost rather than revenue generation – compliance experts said reducing such employees in crypto companies could pose regulatory and reputational risks as the sector continues to face. regulatory review in the United States

“Compliance specialists join a firm for pay and titles and also for a good compliance culture,” said Will Brown, a financial services manager at Hamlyn Williams Inc., a global recruiter focused on regulated industries. “If [the firm] got a reputation that they reduce compliance employees when the market gets tough, you would worry about longevity to join the compliance staff. ” He added that this could lead to more turnover in the compliance function.

Coinbase said in June that it would cut the workforce by 1,100 employees, or about 18 percent, and said it had grown too fast and that a potential recession “could lead to a new crypto winter.” The company set up a “talent center” to help laid-off employees find new positions. Persons listed on the hub included compliance analysts, marketing associates, investigative analysts, financial crime investigators and a compliance and anti-money laundering manager in India.

The cryptocurrency exchange also withdrew several job offers, including for a customer knowledge employee and compliance employee, according to the talent center.

“Coinbase will never compromise on its commitment to security and compliance and will continue to engage in security and compliance roles around the world,” a spokesman said in an email. The company expects to have about 5,000 full-time employees by the end of the second quarter, four times the roughly 1,250 employees it had at the end of 2020, the spokesperson said. Coinbase’s risk and compliance team “is significantly larger today than it was at the end of 2021,” the spokesperson said, declining to provide numbers.

The cryptocurrency exchange Gemini cut 10% of employees in June, citing the effects of the market downturn. The director of business operations and intelligence, who most recently was deputy chief of compliance officer, and the head of risk have resigned in recent months, according to people familiar with the matter.

Representatives of Gemini declined to comment. In a blog post in June announcing the layoffs, Gemini’s founders, brothers Cameron and Tyler Winklevoss, said the job cuts were a response to a “contraction phase” in the crypto market and a decision to focus only on products that were absolutely critical.

The redundancies at the two stock exchanges are unlikely to significantly affect their compliance functions, said industrial observers, as the companies built up these teams quickly and employees should be able to take on additional tasks. “They can handle the shocks to some degree,” Brown said.

Despite the layoffs, recruiters said crypto companies’ demand for legal and compliance talent continues, especially among startups, as these businesses navigate a evolving regulatory environment. In June, 261 crypto-related law and compliance job postings were posted in the United States, according to Google trends compiled for The Wall Street Journal by Cryptojobslist.com, a website focused on the blockchain industry.

Companies looking for compliance personnel include crypto companies such as the financial technology company MoonPay and FTX US, part of the Bahamas crypto exchange FTX, as well as traditional financial institutions such as JPMorgan Chase & Co.

The ads are for all types of candidates, from entry level to executives. Crypt exchange Kraken had the highest number of open legal roles, with 31 new job advertisements between 23 June and 30 June and a total of 112 legal roles published in June, according to the data. The roles in Kraken include 24 middle-to-senior level and seven director-level positions.

Although the crypto industry does not meet the same regulatory standards as traditional financial institutions, there is still a demand to build compliance capacity at these businesses, Brown said. “There’s a lot of pressure on these companies,” he said. “Even in a downturn, you still have to hire – it will not go away.”

Brian Burlant, a legal recruiter at executive search firm Major, Lindsey & Africa, said he sees the recent cryptocurrencies as a correction for the nascent industry after a wave of hype prompted investors to pump money.

Mr. Burlant, who this year worked on the search for one attorney general for one cryptocurrency exchange and another for a Web3 fund, said that compliance job candidates could think more carefully about the companies they choose, including by looking more closely at their business models. , he said.

“The smart companies take on the people with the best reputation; they have a clear role to play, to help shape what this regulatory environment looks like in the years to come, he said. “Regulators need input from these people. [The companies] will not step aside; they want the most important players on their team to have an impact.”

Write to Mengqi Sun at [email protected]