Lucy Taylor, sales manager at Coinbase, talks to Shanny Basar about shifting from traditional to crypto prime brokerage, building a new global financial system and redefining success.
Lucy Taylor had worked in prime brokerage sales at UBS and HSBC for the majority of her career before joining crypto firm Coinbase in November 2021. She became aware of crypto around 2015 and 2016 when she was working in Switzerland and former colleagues, contacts and clients moved into blockchain projects. As a result she started to investigate the efficiencies that blockchain technology can bring into financial services.
“I think that what excited me most about crypto is being part of building a new global financial system,” Taylor says.
She joined soon after the US-listed firm had launched Coinbase Prime, a prime broker that aims to provide a one-stop shop for institutional clients who want access to crypto. Coinbase Prime was officially launched to all institutions in September 2021 following a beta launch in May that year.
Taylor says, “We launched Coinbase Prime as an all encompassing prime broker solution for institutions which has four pillars – multi-venue execution via smart order routing to regulated exchanges and over-the-counter venues and providing transaction cost analysis; being the largest crypto custodian and also regulated by the New York Department of Financial Services; prime broker financing; and data and analytics.”
She sits within the institutional sales, trading and prime business at Coinbase in the UK. Her main focus is on UK hedge funds and the Swiss markets across all client segments. Her experience in traditional finance, or TradFi, has proved to be a great foundation as prime brokerage can be used by many different clients. This experience was beneficial as Taylor moved into her role at Coinbase to understand client needs, how they execute their trades and what is really at their top of mind.
“I’ve been covering some clients for 15 years and I hope that will continue for the next 15 years,” she adds. “It is fascinating to see what a family office is doing, compared to a hedge fund or an asset manager.”
Taylor continued that there are many synergies with traditional prime brokerage at Coinbase. However, crypto is a 24/7/365 market and settlement is instantaneous so trades are typically pre-funded and real-time settlement and risk management becomes incredibly important.
In the early days of the crypto economy institutional investors were hesitant to invest because the appropriate infrastructure to execute trades at scale and complex financial transactions was lacking according to Taylor.
She says that clients have said they now choose Coinbase because it is the largest publicly traded crypto company in the world and has a comprehensive platform and suite of crypto-forward products and services along the full spectrum of the value chain. Coinbase has $256bn of assets under custody, of which $134bn is from institutional clients..
“Coinbase Prime offers 212 digital assets for custody, and166 for trading which sets the ceiling in terms of breadth of our business,” she added. “As the largest digital asset custodian we can offer scale in terms of protection of client funds against loss and we are regulated by the New York Department of Financial Services which gives clients comfort.”
Gross trading volume for institutional clients at Coinbase was $1.14 trillion in 2021, compared to $120 billion in the previous year, which Taylor argued demonstrates the ramp-up in institutional adoption.
“We’re seeing a lot of clients coming to us with a keen interest to get into crypto,” she says. “The majority is in speculative investments where a hedge fund, family office or even an asset manager is looking to trade.”
In addition, a very large part of the client base is introducing brokers who want to extend crypto services to their own end-clients by using Coinbase’s infrastructure. For example, Coinbase acquired crypto data analytics platform Skew, which has been integrated into Coinbase Prime to offer historical and real-time data on spot and derivatives which Taylor said is incredibly useful to clients.
Brian Armstrong, CEO and Co-founder of Coinbase said in the shareholder letter for the first quarter of this year that the firm expanded its market maker program which deepens liquidity on its exchange and helps provide best execution.
He wrote that the secular tailwind of institutional crypto adoption was continuing and Coinbase welcomed or expanded relationships in the quarter with firms including Brevan Howard Digital, Invesco, Lakestar and Millennium Global. However, institutional trading volume fell by a third, 37%, from the fourth quarter of 2021 to $235bn as crypto prices dropped.
Crypto winter
The rapidly changing economic conditions led to Coinbase announcing an 18% cut in the number of staff in June. Armstrong said in a blog that a recession could lead to another crypto winter that lasts for an extended period.
“In past crypto winters, trading revenue (our largest revenue source) has declined significantly,” he added. “While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”
In July Armstrong said in a blog that after 18 months of approximately 200% year-on -year employee growth, “many of our internal tools and organizing principles have started to strain or break.”
Armstrong wrote: “Now, as we adjust to our new scale, we need to get back to the things that made us successful — to drive more efficiency and shake off the complacency that can creep into a bigger company. It won’t be easy, and we’ll need to keep adjusting. But we got this far, and I’m confident that if we make smart decisions now, it will only be the beginning.”
Taylor also feels very positive about the growth of crypto and the involvement of institutions despite the current market conditions.
“Coinbase has been in this space for 10 years and has 13,000 institutional clients,” she says. “I’m very optimistic this will continue to grow and that Coinbase will be their chosen and trusted partner.”
Traditional banks are likely to eventually move into crypto prime brokerage but Taylor argued they will have to adapt their infrastructure to support instantaneous settlement 24/7/365. Coinbase will also be able to partner with them so they can use the infrastructure that the firm has already built.
Taylor notes, “We are a crypto-first company and have been operating for 10 years. We have a track record of experience and we are the first publicly traded company to hold crypto on our balance sheet which makes us the most knowledgeable partner for institutions.”
She sees the biggest opportunity in Europe as continued institutional adoption across different client segments.
“In addition to the deployment of capital for speculative investment and introducing brokers leveraging our infrastructure, we are also going to see more activity from corporate clients,” adds Taylor. “There are also new and emerging cases such as sports franchises launching NFTs.”
Coinbase currently offers spot crypto products but has acquired FairX, a derivatives platform regulated by the US Commodity Futures Trading Commission, in order to offer crypto derivatives once Coinbase receives its CFTC Futures Commission Merchant (FCM) license. Armstrong said in his shareholder letter that a well functioning derivatives market is critical to the trading ecosystem.
Career
Taylor wanted to work in investment banking as she has always been fascinated with how financial markets function, and how wealth is generated and preserved. “I have found it incredibly interesting and I’m really passionate about working with fantastic and diverse clients,” she says.
She advises women who want to work in finance that being customer focused and knowing your products are two fundamental skills that are very important and transferable beyond sales and client relationship management. In addition, getting a mentor and utilising the network is also incredibly valuable.
“Being flexible and having a ‘can do’ attitude is fundamental,” Taylor added. “If I’m given a project I will run with it and try my best every time as I’m going to learn something and meet some amazing people on the way. I think that you can always take a positive out of everything.”
Taylor defines success as twofold between work and home. At work her favorite part is meeting a diverse range of clients every day, trying to help them with their individual needs and building long-term relationships. At home she has a five year old son and loves that Coinbase has allowed a lot of flexibility and is very supportive of her as a working mother.
Over the years she has learnt that, as a working mum, life should be structured to reduce complexity as much as possible.
“For example, in my previous life pre-Covid I had a 90 minute commute but Coinbase is remote-first,” Taylor says. “Although I travel for work quite frequently through Europe, the flexibility of working in a remote-first company is amazing and I now live about five minutes away from my son’s school.”
Accordingly, she believes in Coinbase’s mission of seeking to increase economic freedom across the world as access to financial services can help empower people to create better lives for themselves and for their families.
“Therefore diversity of thought is key in terms of hiring from different backgrounds, experiences and skills which I absolutely love,” Taylor adds. “There is a lot more that can be done but Coinbase is very committed to moving the dial and it is a privilege to be part of a collection of wildly talented and diverse individuals.”
