Jennifer Campbell is cofounder and co-CEO of Tagomi, a prime brokerage for crypto assets that helps investors make large trades, in sizes ranging from hundreds of thousands of dollars to tens of millions. Since its 2018 founding, Tagomi has raised $28 million in venture capital from investors like Peter Thiel’s Founder’s Fund and $400 million crypto fund Paradigm. It has 200 institutional clients trading on its platform and is based in New York.
Forbes: Tell me about your background, starting with what you did before Tagomi.
Jennifer Campbell: At Union Square Ventures, I spent a lot of time researching crypto, and I became the go-to person whenever someone wanted to invest. Especially for anyone investing in size, there weren’t great solutions. These investors were used to someone making their trades for them and providing much more sophisticated execution. They weren’t seeing that in crypto, and it really was a barrier to entry for them.
I ultimately decided to start Tagomi with my partner, Greg, who is the O.G. in the electronic trading space. He was a partner at Goldman Sachs for ten years and their head of electronic trading. He’s very familiar with many institutional clients and their needs.
Forbes: How does Tagomi’s product work?
Campbell: You only need to onboard once with us, and you get to trade across all the different liquidity venues—including exchanges and market makers—across the globe. You get much better execution and pricing, because you’re sitting across multiple exchanges, and we’re always monitoring each of the exchanges to make sure you’re getting the best price.
Forbes: How many exchanges do you link into?
Campbell: About ten.
Forbes: Who are your customers?
Campbell: It’s a really wide range. We have a high number of individuals who just want to buy some bitcoin and really want to find a trusted counterparty, and they want more high-touch services. In the middle we have a lot of crypto funds. We have almost all the top crypto funds onboarded—folks like Paradigm and Multicoin Capital. We have a couple registered investment advisors (RIAs) who trade on our platform on behalf of their own clients. And then we have some broker dealers who bring their network of clients.
Forbes: What coins can you trade on Tagomi?
Campbell: It depends on the jurisdiction. In New York, you can trade the top five, including bitcoin, ether, XRP, litecoin and bitcoin cash. Outside of New York, you can trade the top 15 coins.
Forbes: If you think back to 2017, what was the pace that institutional investors were coming into the market that year, and how does that compare with today?
Campbell: I don’t think there has been that much change. I think when the average person thinks about institutional clients, they’re thinking about Fidelity and iconic names, and those companies are not trading a lot of volume. The smaller crypto funds, for example, are really in the market, not just today but also in 2017, 2018 and 2019. That’s what has been most consistent. What has really changed a lot has been the narrative. In 2017 a lot of the bigger institutions said they were coming in, and in 2018 they kind of pulled back. Then in 2019 there’s a lot more conversation about that as well.
Forbes: Many people I’ve spoken with recently have said institutional investors are starting to come into the market more quickly. You don’t necessarily think that’s the case?
Campbell: They’re definitely coming in more than 2018. There are more traditional folks like smaller hedge funds that have come into the market. We’ve had more conversations with the large institutions, but none of the top five institutions are actually trading today.
Forbes: Do you think that will change a year from now?
Campbell: I think they’ll definitely be coming in; it’s just a matter of time. There’s just a long set of approvals. There are 12 different committees before it can go to the next stage, then you have to go through another 20 committees, so it’s a very long process. I think a lot of these institutions are genuine in their curiosity, but I don’t think any of them are really that close yet.
Forbes: Are there certain areas of institutional investor interest that you’re monitoring closely?
Campbell: Not so much. We’re still watching the ETFs pretty closely. We have talked to a few of the large institutions that are interested in building index funds, but most of these are still conversations.
Forbes: For some institutions that haven’t invested yet but are considering it, what’s holding them back?
Campbell: It’s really the regulatory clarity that they’re looking for. They’re trying to understand, “Okay, bitcoin’s not a security, but what about everything else? Can we get some clarity from the SEC? What is their stance?”
Forbes: What are the most important issues in regulation that you’re watching?
Campbell: The space needs some legal safe harbors so that entrepreneurs who are well intentioned get some guidelines and reassurances that when they’re trying to do the right thing, they get some protection. In the 1990s, we had laws like the Communications Decency Act and the Digital Millennium Copyright Act, which created safe harbors and really limited the legal liabilities for a lot of entrepreneurs in the internet age. Now we have very valuable companies like Facebook and Twitter, and it’s very exciting that the U.S. is where a lot of those companies were founded.
We need more clarity on what the regulatory paths should be. Should I be getting a broker dealer license? There should probably be some sensible legal reclassification of blockchains and cryptocurrencies, because a lot of the current regulation is a force-fit, and it’s unclear which paradigm cryptocurrencies really fit into. So what happens is that instead of just picking a bucket, you have to apply every single bucket to it, which doesn’t make a lot of sense.
Forbes: So you think there should be new legislation?
Forbes: Why do you think the SEC is moving more slowly than many people expected?
Campbell: Perhaps one reason is that people thought the internet was clearly something different. It clearly did not fit into any traditional legal paradigm or bucket, so it seemed obvious that we needed different laws. Whereas with cryptocurrencies, there are some competing tensions and overlap with securities laws. So it’s not quite obvious to some people that it should be a completely new category, even though I think it definitely should be. That’s why it might take a little bit longer to come to that conclusion.
Author: Jeff Kauflin