RULEMATCH Spot On – The Long Hedge

With Wilhelm Roth

02 July 2024

30 min read

Crypto hedge funds and asset managers have seen rapid change over the last few years. With changing market structure and more institutional investors, come more possibilities for advanced strategies to take advantage of market trends. But how will prime brokerage and a new emphasis on low-latency infrastructure change the game even more? And how will well-established crypto hedge funds adapt their approach to these realities – also on the regulatory front?

In this episode, RULEMATCH Spot On hosts Wilhelm Roth, founder and CEO of Coinmerce Capital (formerly Icoinic Capital) – a Netherlands-based asset manager with multiple crypto asset funds. Wilhelm is a founding member of the Digital Assets Steering Committee of the Alternative Investment Management Association and a Research Fellow at the Digital Euro Association.


Episode show notes:

(00:59) – Intro and a look down “memory lane”

(3:16) – Asset management strategies for crypto

(5:38) – Building a diversified crypto fund strategy at Coinmerce Capital

(8:55) – Moving from retail to institutional market structure

(11:52) – Why pushing education of regulators was/is key

(13:56) – The “proper segmentation” of crypto market players

(16:06) – The weak points – including latency – of the current market landscape

(17:38) – The critical need for clearing houses and “proper custodians”

(18:36) – The link between capital efficiency and partnering with technically capable venues

(20:52) – Working together, part 1: Dealing with banking partners (”Fees are too damn high.”)

(24:34) – Working together, part 2: How prime brokers speak the “right language”

(26:12) – How does the crypto PB space expand beyond one dominant player?

(27:29) – Competition among venues – and what will be the edge

(28:04) – Dealing (transparently) with counterparty risk – FTX case in point

(31:22) – Uncompromising due diligence and transparency

(35:12) – Why responsibility is key for institutional adoption

(39:31) – What could change in fee strucutures

(43:24) – What horizontal market infrastructure specialization (and compliance) might do to fees

(45:14) – The multi-facets of the Swiss – Dutch crypto connection

(49: 11) – The heritage and advantage of Dutch trading firms

(50:20 – The implications of MiCAR for a European fund manager

(52:16) – No regulatory iron curtain over the EU

(55:04) – Looking out for dark pools


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Episode transcript:



To be fair, there is quite a good amount of work still to be done. I think one of them, and that’s just kudos to RULEMATCH, that’s the element of latency.

At Coinmerce Capital throughout the years, our main issue when discussing about partnerships with venues was that our algorithms were so fast and advanced enough that the venue didn’t have the capabilities to allow us to really “do us” to the fullest.

And not for our lack of wanting to.

And especially with market making, this is kind of like the most exciting part for us to be told, hey, you have the freedom to move.





Hello and welcome to another episode of RULEMATCH Spot On, the only podcast focused exclusively on the institutional crypto and digital assets industry.

I’m your host, Ian Simpson.

And if you want to know what banks, hedge funds, asset managers, high -frequency traders and other institutions are doing in crypto and how they’re doing it, this is the place for you.

My guest today is Wilhelm Roth. He is the founder and CEO of Coinmerce Capital, formerly Icoinic Capital, based in the Netherlands.

Among many other things, Wilhelm is a founding member of the Digital Assets Steering Committee at the Alternative Investment Management Association and a research fellow at the Digital Euro Association.

Wilhelm, welcome to RULEMATCH Spot On.



Good to be here. Thank you for having me. Thank you.



So you are an experienced fund manager in crypto. That’s a bit of a rare breed. Already in 2017, you got started. Also, that was a good year since it was a bull run in crypto.

Without trying to compare you directly to Ray Dalio and Ken Griffin and other big names, it’s fair to say you are a veteran in the space.

I’d be interested to know just kind of high level from a fund management perspective, what is interesting or unique about crypto markets and also what is challenging from a fund management perspective.



Yeah, I think that maybe it’s going to be a bit of a cliche, but

I think what is unique is more of the time we’re living through.

The introduction of crypto as both technology as an asset as a currency was something that we had to explain and almost fight a bit through the years to explain – that it is a technology then that it is an asset and now that it is becoming in the interest of CBDC’s as a currency. That’s kind of the time we live through – kind of living through the “renaissance” – living through web 1.0 and now the 3.0.

The challenge for asset managers is kind of how are you actually approaching with different TradFi strategies, but also new unique crypto-based strategies towards managing a crypto asset portfolio for both accredited investors and institutional parties.



So with Coinmerce, you’re doing fund management.

I’m interested to know when you got started and were setting things up – and thinking about setting things up – were you kind of thinking, “Let’s take strategies from TradFi and just apply them to this new asset class?”

Or did you really go down deep and try to find new ways and new things to do with crypto at the very beginning?



Yeah, so if you did go back down memory lane at the time, 2017, and looking back even ‘16 and ‘15, most crypto managers were kind of called “basement management.”

You just really try to get into it and most parties were fundamental analysis driven asset managers.

Icoinic and now Coinmerce Capital started back then from the perspective that, “Okay, there’s enough fundamental analysis out there. It is important. We need to understand the asset class we’re actually adding on a portfolio.”

But with the quantitative execution and that kind of bringing together both kind of the TradFi perspective to it, but also the crypto focus was the main one.

If you look at the strategies, that’s a bit harder.

I think that in that regard a lot of it was more of a state of the thesis because we tried to implement “smart beta strategies” and then more market making strategies and you kind of tried to test during a sandboxed environment what actually works.

And a lot of assumptions that we had at the time of course showed that market making was one of the major strategies that we wanted to deploy.

It did work especially in a very cyclical environment, but it has challenges when of course you see kind of more of a flattening and a reduction in volumes.

Then you need a change in strategies and that evolution brought us to a state which I think is the most exciting now that there is an ability to have a full shelf of strategies and for the trading team and the quants to actually pull and choose strategies as merits, of course, per the mandate of the portfolio.



And so just diving into that, you talked about the evolution, and I can understand trying things, what works, what doesn’t, that develops over time.

Now you have two funds, I understand, the Core Fund and the Pillar Fund, with a little bit different focus.

Just walk us through how you came to those two focuses and those two main strategies, so to say.



So there’s two main layers that drove us to launch the two funds.

One had to do with what kind of strategies we’re indeed looking to deploy and how capable we are in doing it.

And the second one is more from the perspective of this is a very cyclical market and we don’t want our LPs to just “panic enter” and “panic leave” all the time.

That “following process” is something that is very frustrating both for the client but also for the asset manager.

At the end, the reason the two sides have a win-win situation is because we would love for them to come when markets are low and we can pretty much do our “2 and 20 fee structure” all the way through and for our clients is to actually get that full return on investment in the funds.

And in it we looked at, “Okay, we have quite a risky strategy with our Core fund and we wanted to create a more conservative neutral strategy with our more delta neutral strategy driven fund.

Just recently, that was just two weeks ago, we announced a new fund coming out and that’s our Frontier Fund and that will kind of close the full suite strategy solution that we look to give to our clients.

Then we have our conservative, neutral, more aggressive and a very aggressive fund.

And our clients can pretty much move in and out of funds alongside the market cycles.



Okay, and just give us a flavor of what that Frontier Fund looks like – what’s going on there?



So in the Frontier Fund, we kind of almost went full circle back. We noticed that, of course, a lot of us in the crypto ecosystem hear about a great amount of exciting new projects that come in, projects that we, as we work for 24/7 around the clock in analyzing and assessing projects have a unique access to and verify for ourselves that those are projects we would love to actually invest in.

And out of that we decided to launch a “quantum-mental fund.”

With that approach we’re able to say, “Okay, here are the assets we have faith in, but they’re also not your, let’s say, the plain vanilla projects – let’s say the Bitcoin, Ethereum, Chainlink and an array of other assets that are much more established, that are platformed on much larger venues, but the smaller gems.

And out of them, give exposure to LPs that have a much higher appetite for risk.



Okay – very interesting. Let’s go back again down memory lane just a little bit, going back to the start, ‘17 and perhaps even earlier.

It’s obvious that the crypto market has developed quite a bit, rather, shall we say, unconventionally when we think about asset classes in that it started very retail, very, very retail, and infrastructure around trading and investing in crypto developed “by fits and starts.”

How much of that was a challenge or what challenges did you see and experience over time to actually do the business, do the trading and so on and so forth because of the way the market is structured?



Yeah, so there’s a few elements in there.

There’s what keeps us going, which is the realization of where we are right now in market maturity and where we believe that it will be in five and 10 years from now.

Of course, it’s crypto.

So the curve ball is much sharper than you would have in the traditional finance ecosystem. The second is primarily infrastructure.

I mean back then, there were not a lot of venues, for example and not a lot of banks that serviced crypto asset managers and hedge funds.

And institutional adoption was not really a thing. A lot of the ecosystem wanted them to come in.

A few VCs already had their mandates with very small exposure just to kind of have some access to crypto. And we’ve seen how it changed, both from adding more venues, adding more custodial solutions, and I don’t just mean your crypto custodian, but proper licensed banks with clearing licenses that are coming into the market, depositories that are slowly coming into the field and with all of that demand to “abide by the requirements,” the kind of “due-diligence box checking exercise of the large institutions.

We saw also parties like FINMA here in Switzerland or BaFin in Germany and even the AFM and IMF in both the Netherlands and France as the regulations start to come into play.

I think this is kind of the struggle that we voiced a lot in the early days and now we are living through it and that’s also for me one of the most exciting part is that we that work in the ecosystem for quite a while.

I know that also RULEMATCH has a lot of its own veterans from the ecosystem that are actually writing current and future financial markets with the bringing together of crypto and TradFi.



Is that something that you pushed for in your space in the Netherlands but also in other places to develop this infrastructure?

Did you engage with regulators and banks and trying to educate them and push things along?



Yeah, very much so.

One of my best memories is actually from talking with the Dutch authorities around “What is crypto?”

And I think especially back then trying to explain “what is crypto” to the regulators in an ecosystem that is very libertarian and anarchistic in its nature.

You find yourself kind of like, “Who are we as well?  What’s our role as crypto financial instruments?”

And in that, the role that we found ourselves is the role of being the bridge between those several sides. And it’s a multifaceted bridge, of course.

And talking to the regulators throughout the years was a joint exercise of educational work.

We understood what are their red lines, and why.

And they understood better and better what is Bitcoin and what are cryptocurrencies and what’s the difference between proof-of-work and proof-of-stake and what is fundamental analysis – what is quantitative execution, what is the role of the new asset managers, the new venues and with that we achieved actually the proper segmentation of our ecosystem which is something that is fantastic.

There’s still a long way to go. Education is something that keeps on going.

But you see also a lot of cross -border discussions. We had talks here with FINMA a few times, as well as BaFin.

So you see that crypto is one of those assets or one of those instruments that is very much a cross-border common requirement for both regulators, associations, and institutions to keep on supporting and learning and educating.



You mentioned a phrase there, “the proper segmentation of our industry”.

Can we just double click on that? What do you mean by that or what did you have in mind with that phrase?



Well, I think that if in the past I would talk and someone would ask me, “Okay, what are you doing, Wilhelm, in your job? What is Coinmerce Capital?”

And I would say, “Well, I mean, you can look at the plain vanilla hedge fund and the way that we manage our portfolios.”

And they would be like, “Okay, and what is your specific color for your fund?” That wasn’t there.

When you would say crypto, it was one box to rule them all.

And similarly, in the case of venues, back then you saw only Binance and Kraken and and so on.

Okay, that’s spot, but what about options market and derivatives and latency as part of it? So we are getting into a more interesting ecosystem – one that I think will see “a great burst of colors,” of different kind of solutions that are required and probably a consolidation that comes after that as well.



Yeah, I mean there’s some elements of specialization in what you said, also some elements of market maturity because some people make the point, and to be fair we make the point as well, that some financial intermediaries take multiple roles upon themselves and that creates risk in the system.

That creates counterparty risk and so on and so forth.

So as it matures and as people specialize, then you can separate out those duties and that’s probably better for the market as a whole.



And better for the companies as well, because at the end, one of the basic rules from a perspective of a PE or VC out there when talking to companies is what’s your focus? And you

should have a focus. That’s always, I think, the key.


Laser focused.

Just coming more into the present day, when we think about market infrastructure, are there some areas that are still somewhat underdeveloped?

I mean, when you think about really professionals like yourself with funds and other trading firms and so on, are there elements of infrastructure or market structure that aren’t quite there yet?



Yeah, there’s quite a lot. I mean, to be fair, there is quite a good amount of work still to be done. I think one of them, and that’s just kudos to RULEMATCH – the element of latency.

At Coinmerce Capital throughout the years, our main issue when discussing about partnerships with venues was that our algorithms were so fast and advanced enough that the venue didn’t have the capabilities to allow us to really “do us” to the fullest.

And not for our lack of wanting to.

And especially with market making, this is kind of like the most exciting part for us to be told, “Hey, you have the freedom to move,” – both from, of course, volumes, but then latency as well.

And that kind of side of the technical infrastructure, because volumes will come and go, but that technical infrastructure is something that, for example, RULEMATCH, I think, solves really, really well.

Another part that is still lacking, and I can’t say enough how much it’s critical to have, are clearing houses and depositories like proper custodial solutions.

They’re still not there, but they’re needed.

They’re really needed, especially when you’re putting on your partner’s hat and considering the investment committee perspective. You want to de-risk as much as possible and ensure capital efficiency. You don’t always need to deploy everything on an exchange…



…nor should you.



However, you need proper partners to support you in that.

Mind you, of course, the regulations and licenses are also prerequisites from DLTs, MTFs, and so on. There is an array of licenses, and there are still a few more that need to come down the line as well.



With regulation and those licenses comes de-risking to a certain extent.

You mentioned capital efficiency and…yeah, there is a lot of capital already moving into crypto, maybe even more now with spot Bitcoin ETFs in the states and institutional investors. But is access to capital to deploy more sophisticated strategies, is that still a challenge as well?



Yeah, to a degree. I mean, well, the short answer would be yes. You can always use more money. Yeah.

Yeah, but you want to use it efficiently, right? And that gap is still a thing.

And of course, a lot of times, one of the simplest things that you can do as a manager is, of course, have as many venues as you can distribute to. So you can, of course, also, again, de -risk. But you want the venues to also have a really good technical roadmap that aligns with your growth, that aligns with the kind of capital that you can keep on deploying and growing with the venue.

And at the end, and that is something that maybe it’s good to have a good amount of veterans also out there, is that a lot of veterans that build their companies or those that their companies still are existing and efficiently existing knows that this is not just a cycle of bull and a permanent summer.

The bear markets comes as well, and in our ecosystem again it’s extremely cyclical.

And when you have a long -term view, strategic view of how to manage your company, with it comes an alignment of what kind of partners you want to keep on growing with for years to come, from their discipline, from their responsibility, from their efficiency and strengths.

And then you grow together.

And a lot of time that brings together the technical growth where you can really share, “Hey, this is where I want my funds to grow to. Here are the strategies on my shelf I would like to use, but I can’t efficiently right now. How can we do it together?”

And I find that the ecosystem started also to open up between companies to actually do it. That’s good.



When you talk about working together, and maybe in this vein of access to capital and capital efficiency, two groups come to mind. One is banking partners, which you mentioned already. The other is prime brokers.

Let’s take banking partners first.

We all know, or we all have heard what a challenge this was for crypto companies in the beginning. Just give us a little backstory on your side.

How was it and how has it, I guess, gotten better for you?



The funny thing is that when we started the company, it’s not like there were a lot of knowledge about “what is crypto.”

So actually getting bank accounts was relatively easy. Because what is crypto?

At the end we said, “OK, we’re an unregulated but registered financial instrument.”



And this was in the Netherlands?



This was in the Netherlands. So in the very, very early days and there also other parties that even started a bit before Coinmerce Capital.

And everyone were super happy. We can get our bank accounts, relationships were good. And then…all of a sudden…

Well, to be fair, there, I’m a big believer in taking responsibility. And I think as a crypto ecosystem as a whole, let’s be honest, there were, there still are actors that took our reputational and trust back.

And it’s our responsibility, of course, to better that impression.

I think we have very well. But indeed, in ‘16, ‘17, ‘18, I like to joke that it was the “rise of also the crypto Nigerian princes.”

And there you saw banks taking three, four, five steps back. And understandably so.

But to the detriment of good parties.

And there, most of the banks that we loved cooperating with really withdrew. There was only one, but you could only do transactions within the SEPA region, which is very limiting when your exposure is worldwide.

And we have clients from Oceania as well as Asia, the Middle East, of course, here in Switzerland. And then you’re like, “OK, how do you even…onboarding is not the problem, but releasing the funds back is the issue.”

And luckily enough for that, the Swiss ecosystem has always been, at least with crypto, much more pioneering than other ecosystems.

And there, some Swiss banks that started about five years ago allowed us to have SWIFT access. And at that point, it allowed us to really operate like a proper manager.






And now you see more and more banks starting to open up to crypto as it’s becoming more institutional grade. And, of course, it will take a few years to be properly there, but we’re getting there. That’s part of market maturity.

And I think hopefully more banks will be open towards crypto and crypto companies.

The one thing that I would see the most coming out of it, and that’s mainly for the early-stage banks out there, there’s going to be quite a competition on fees.

There’s this meme in the (United) States of: “The rent is too damn high!”

Fees are too damn high.



We’ll come back to that topic maybe in a minute, but yeah, interesting…

So that’s banks and that’s for servicing the funds, for doing the normal operations. Then there’s the topic of prime brokers and those who maybe on one hand serve as kind of a buffer against certain counterparties or certain risks in the ecosystem, but also a booster so that you can do more with capital and so on.

Is that something that’s starting to develop and something that’s needed in the next evolution of the market?



A hundred percent. That’s indeed part of this maturity and right now the PB market is dominated, I think, by one quite known party – that puts the pedal to the metal on both their requirements to be a proper PB as well as on the other side to give inspiration for up-and-coming parties to come in and compete with them and find their niche in there as well.

So 100%.

I think the role of PBs allows asset managers to have a bit of a “sigh of relief” and have kind of a centralized party that decentralized the gateway into a lot of venues and that speaks the same language.

And that I think is one of the things that is part of this maturity.

You start to notice that crypto financial language that is becoming more common for others, standardized and yeah…



I think we know which name we’re talking about with regards to that prime broker, but let’s be honest, domination by one player maybe isn’t always the best.

What will it take for there to be more such players in the market? More maturity and other bull run? What will it take to really see more of that?


Well, first of all, the maturity of the entrepreneur that will start the competing company by their own right.

I think that’s the first step and that’s something that most companies have a tendency, or I wouldn’t say most, but companies that enter the ecosystem, I think that it’s very easy. It’s just missing this part of the niche in there and therefore, “I’ll click on it and hopefully it will work.”

But there’s a lot that comes with it.

Second is also, you referred very well that there is an appetite to this kind of institutional parties and larger and larger managers all the way to the pension funds that are just waiting to see that there’s enough history to some of those instruments.

And there’s a lot of room for new PBs to come in and also within the prime brokerage ecosystem.

There’s so many different niches that haven’t been tapped to yet.

And there, I think also if you ask that large party, they’ll probably say, “We welcome our competition.”

It makes them better, but it’s also better for the ecosystem. And to an extent, we see it with venues as well. If you look back down memory lane, Binance was the kingmaker.

It was one of the sole parties out there and its dominance has been steadily decreasing to an array of other venues and one of the strengths is, “Are you licensed?”

You know, that’s a basic question.

“How are your structures managed? Do you have a Chinese wall between the different instruments of your company? That’s the segregation.



So we mentioned about prime brokers and their roles – buffer and booster. One of the biggest –  let’s say – sad stories in the crypto market was FTX a little while ago.

You quite transparently on your website say that you had some exposure to FTX with one of the funds.

What did that whole experience teach you or what should we take away from that?



Yeah, and I always say that the first lesson is “trust but verify.”

A lot of us that worked in the crypto ecosystem know that we have a lot of our discussions when onboarding and when going for our day-to-day operations where we could ask for, let’s say, an audit trail and “please give us the record.”

And I think before FTX, before Three Arrows Capital and other similar stories, you would give a bit more leeway because you know that operationally we’re still missing personnel.

We need more compliance officers. We need more risk officers. We need more back-office roles.

I think throughout the ecosystem there’s quite a competition around staffing right now. And you would say, “OK, I can give another month. It’s OK.”

We don’t have that privilege anymore. That’s one of those things that we say, you know what, then no.

If we don’t get it in time, we can give an extension of 14 days. But if that doesn’t happen, then we’re sorry. But that’s where we stop.

We don’t take that risk anymore, which is something normal in the traditional ecosystem.

So “trust, but verify” the leeway that we used to give in the past made us more cynical.

We don’t have it anymore.

And maybe the most important part out of it all is maybe the lesson around how due diligence is done on crypto instruments, whether there be a token or a hedge fund or a venue. You want to know the team, you want to understand their processes, you want to do the proper long frustrating DD.

But it matters. To be sure, yeah.

And maybe the most critical part, and I think you hit a nail on the head on this one, transparency.

The expectation that as kind of the crypto perspective from the outside world, or at least the view of crypto is that we are open, you can see everything on chain.

We’re the most transparent ecosystem out there until it comes to financial instruments, until it comes to sometimes even the projects themselves.

And there, you need to put your hands in the fire.

And for us, the strategy towards the exposure to FTX was we want more transparency. This is what happened. We have it on our website. We also discuss it very openly.

And for the experience that we have, so hopefully other managers and other, even other venues, don’t repeat those same mistakes.



And fortunately, you came through that experience and it didn’t cause any lasting damage, I imagine. There were other funds, other people in the space that very famously flamed out, Three Arrows Capital, you mentioned, and some others, maybe also in line with the cycle in crypto markets.

But thinking about those who didn’t survive or weren’t sustainable, what is the problem?

What actually caused it, besides out and out fraud?

Is it a lack of due diligence? Is it a lack of fundamental analysis?

What would you point to those players who haven’t quite got a handle on it?




Yeah, there is a bit of a mix of it as well as faith. I think that that’s belief that you’re working with a venue, that the IT works really well.

The cost of, let’s say, the cost of futures on FTX was so competitive that it was really hard to say, “Okay, I’m going to go to another venue to be able to get access to the same product.”

And there, the kind of almost the disbelief that it could happen to such a large party. So there indeed, the analysis, the deep dive, the very strong requirement of, “OK, I need this audit trail, I need this UBO registration, more of that transparency.”

I think now it’s becoming something that you just don’t give ground on anymore.

Again, it’s a “trust, but verify.” I love to partner, but I want to know who my partner is.

And then on the other side of it, if you look at it from an asset manager perspective, at the end, we want to have as many venues as possible that we can trade on.

But if you look a few years back when you would discuss with BaFin or the FCA in Sweden as well as in the UK and AFM in the Netherlands, a lot of the questions that came back to us is “Why don’t you centralize a bit more?”

Because this is quite uncommon in the traditional financial ecosystem to just trade all over the place.

Unless you’re, of course, more trading houses, and there’s some sort of logic behind it.

And that allowed us to go back and say, “Well, we know what we’re doing here.”

And it changed completely now. And if you look at a lot of the asset managers as well as market makers that relied solely on one venue, the old saying of “Don’t put all your eggs in one basket” still holds true.

And that goes, of course, for us as well specifically beyond just saying, “Okay, do we want to have this kind of venue and that kind of a venue depending on the products they have or the infrastructure that they have.”

We also have to think, “Okay, how do we also de-risk having sole exposure to this one venue on this one specific product? Are there more?”

And that challenges our research team also quite to the max. But it’s also the most exciting part of it.



Sure, I mean, just thinking about what happened there, there was maybe a lack of diversification among some funds.

Would you say then that’s kind of a market infrastructure, market structure problem that could have led to some of those, I mean, FTX had quite the liquidity. There’s the so -called Alameda liquidity gap since FTX went belly up.

Was that maybe something that contributed to other funds not doing so well?



I think so. Maybe also important to say that FTX is responsible for FTX.

And especially…I talked to colleagues from Sequoia and they had quite a large exposure and of course other players in the ecosystem as you mentioned as well.

It’s not coming from our lack of wanting to hold them to account. But yeah, again, it makes us more cynical and that’s not a bad thing.

It’s an ecosystem that, let’s be fair, we’re a glorified MVP as an ecosystem.

We have proven that we’re here to stay and for discussions with new venues, especially new venues that launched after FTX, which means that those venues had the privilege to sit and look at this horror show showing itself and implement the lessons that we as a potential client wants to see with new venues.

And I think you see it a lot. That gives me a lot of confidence.

I think it gives for a lot of our clients a lot of confidence when we’re able to show them in a closed session, kind of an LP meeting, “These are the exchanges we work with. These are our questions to them. This is what we see out of it. Here are the sentiments that we can bring to the table.”

And we have quite an open and transparent discussion as much as we can.

And maybe one additional note there is the role of allocators to asset managers now, because they guide us quite a lot.

Most allocators haven’t deployed a lot of the dry powder that they have.

And of course, as an asset manager, you’re just there knocking on the door every Monday and Thursday checking, “Is it the right time? Is this the right time? Here’s an update from my fact sheets, my key document is prepared for you to check again and I’m inviting you for partners’ discussions.”

But their feedback continuously relies on, “Give us more transparency.”

And the transparency doesn’t stop by our shiny face.

It also comes to the transparency that we bring, “Here are our partners and we’re proud of them and this is what they’re doing. And that’s why you should be aware of them and have the trust to actually have exposure to crypto through us.”

And for us to then deploy that capital effectively for our partners.



Yeah, there’s multiple levels of due diligence happening there and probably it won’t go away. I mean, it’s not that we’re going to go back to a situation where you just, yeah, rubber stamp everything and just go on with the party.



That’s part of the institutional development of our space. I think those days are indeed gone. If just a few years back, I couldn’t tell you how rare it was that I would talk to another manager that would tell me that they actually have a risk officer that is not the same officer as the compliance officer and actually discuss how you do those kinds of lines of risk.

It changed.

And interestingly enough, I think if you look at most availabilities for companies out there, they’re searching for compliance officers, risk officers, legal officers that are ready to learn our experience or non-experience in the ecosystem. And that’s this kind of a long -term investment that showcases not just from the partners, but also from the kind of people that stand behind the company that you’re operating.



So great time to be a legal or compliance or risk officer from TradFi who’s looking for a new challenge.



100%. Those grey suits are being hunted constantly.



You mentioned fees. Now we’ll come back to that topic because with the spot Bitcoin ETFs in the States, there was this very public fee war going on.

With your funds, I think you stick more to the traditional 2 and 20 model.

How are fees changing? How do you think they will change over time? Will there be a move towards even cheaper fees in your business line, or what do you think?



The shortest answer is yes. I think there is going to be a fee war in the coming five years on multi-levels, from the venues between themselves to the asset managers to the custodian providers.

And I mentioned earlier, my biggest feedback when I’m asked about the issues that I have as an asset manager is that the fees are too damn high.

If I go to most custodial providers in crypto, those fees are, yeah, we have this saying, “Hashtag to the moon,” right?

It’s very costly. And as an asset manager, I’m looking, OK, I have this cost on custody and this cost for trades and this cost on depository and additional team costs.

And then as an employer and as an entrepreneur, my brain works maybe a bit differently. If I go into a partner’s company office and I see people walking around smiling, I’m calculating the salaries.

So it’s okay, then that means that’s their cost throughout the year.



I’m paying for all of this.



Exactly. And it also then reflects itself on the portfolio’s own performance because then where do you put those fees? “Do I put it on the LPs?” I don’t think you should.

I think it’s part of what we see in the management fees. But in most cases, you can’t. It just doesn’t fit.

Then you’re running a loss on your management fees. And there, I think that is going to be quite the struggle for established parties that have high fees, that haven’t realized that the bigger parties that are coming to town.

They would be happy to even increase their fees by 0.5 % and they are reaching their yearly KPIs.

And that competition, we saw it, especially with the Bitcoin ETFs, what happened to Grayscale, what happened with Asia and others, you just see the movements at that point.

And being competitive on fees will be, I think, the making or the undoing of parties that we got used to now.

Also, within the crypto hedge fund and asset management ecosystem.

Probably you remember as well, I mean, there’s a lot of funds that have ridiculous fee structures.

Because if you can make 200 % a year, well, maybe I’ll take a 10% management fee and 50 % performance fee.

As you said, our philosophy and our view has been that we want to be regarded by institutions, regulators and our LPs as proper, in Dutch we say, “duofenormal,” being a normal manager out there and with it our fees – unlike a lot of parties even from back then that had ridiculous fees.

So from my side, I think that those fees, at least the normal ones, will stay if they’re market competitive. For those that are still quite high, there will be some squeeze in the coming years.



I mean, you could expect that as companies do specialize in certain areas and they take on a very specific or segregated role in the market structure, would that bring fees down or would that increase fees?

Because then when you need to have certain services, you have to layer one, two, three, four companies on top of each other.

I’m not sure which way that goes…



I think that in the short term, at least 12 to 24 months, I would expect an increase in costs rather than reduction. And that’s maybe a bit more from looking at it from a corporate strategy perspective.

We are going to a consolidation run in the coming three years. And a lot of parties will come together and part of it will be indeed in the short term that we’ll have to see this “cake layering up” until it will start to slowly balance itself out.

But that I think comes with a proper market maturity in five to 10 years. And I hope that a lot of the recognized faces we see in the ecosystem are still there because there’s fantastic people in the crypto financial ecosystem.

But in the short term, again, I assume a lot of increase in costs and I can understand it because if you’re going to get licensed, you need a lot of team to put into a problem, into a challenge that you maybe as an entrepreneur, an unlicensed entrepreneur, you don’t need to put the “umph” behind it – that increases your overhead, so you have to increase costs.

But at a certain point it becomes part of your operations. If you onboarded enough clients, if you’re established well enough, that fear will start to go down.



Let’s switch gears and talk geography a little bit.

You’re based in the Netherlands, but, of course, doing quite a few things here in Switzerland, and as you mentioned, engaging with regulators in multiple places.

Just talk to us a little bit about that “axis” between Netherlands, Switzerland, what was attractive here, what is attractive in the Netherlands, how do they compare?

What can you tell us about that?



So I think that Switzerland has a very unique role in the crypto-financial ecosystem. It has been the pioneer to adopt or at least convey access to crypto -financial instruments – when most of the world either flip -flopped every season, we’ve seen it in some Asian countries, or just firmly said no, like we’ve seen in the States.

The Swiss ecosystem – and there, big kudos to FINMA and great people here in Switzerland that pushed forward with associations and the kind of direct educational cooperation here.

This helps make sure that you have quality discussions and debate around what is crypto, how the technology works as a gateway, then why is it an asset, and what kind of assets are out there, and what can we expect to come, and then what are the instruments that those assets are going to be traded on.

And then, of course, now the discussions around central bank digital currencies and how, at least in the case of the Netherlands, part of the euro system goes through this evolution of being, let’s say, physical money to what we already use as digital money for our phones and web access bank accounts to the next generation of layering on top of it cryptographic support.

And throughout all of that, Switzerland has been quite a beautiful island for most of us throughout the continent to come to.

It’s been extremely refreshing for the maturity of LPs here, also the kind of LPs.

So in Switzerland there were more family offices and funds of funds were super curious about crypto, VCs that look to have their kind of alpha tail exposure for crypto, but wanted to have a European base as well.

And there, the Netherlands being known as a, let’s say, quite a harsh jurisdiction to operate under and our approach has been to say that we’re sticking to the Netherlands, not because it’s easiest.

A lot of parties went to Malta and Cyprus and other exotic jurisdictions that I love for holiday, but maybe not for my company.

And that’s, I think, for us exactly. And it gained for us also throughout the years this ever-increasing trust from the Swiss ecosystem.

Because it’s of course the time that you’re there, but also the kind of work that you’re doing there. And this unique dialogue between these two relatively similar cultures from the Dutch are known for being extremely direct. The Swiss might be a bit less direct, a bit more polite.

But both have the approach that you want to know someone really well throughout the years to build long-term partnership with.

And that brings, I think, the two sides together, where the Swiss puts the innovation from a regulatory and adoption side. And on the Dutch, well, we do what we do best, and that’s trading.


Yeah. I was just going to say, that’s the other part of the equation that maybe some people, they know it, but in the crypto sense, it’s kind of maybe not brought out so much.

Yeah, you have great trading houses. We know some names, some names that work with RULEMATCH as well, based in the Netherlands.

That’s a part of the heritage in the financial system in Holland that’s quite strong and still growing and continuing, right?



Yeah, and that’s a great pride to look at companies like Van Eck and their multi-year approach to both Dutch regulators, German regulators, as well as US regulators, and having that verification of their struggle throughout the years being held true, of course, with the Bitcoin ETFs.

And I think as you referred, a big houses like Flow Traders that entered relatively early as well having faith in the ecosystem to both have direct and non-direct exposure.

And of course, other trading houses like IMC, Optiver and so on. That gives a lot of pride to see that the companies are not just talking the talk, but also walking the walk.



We can’t finish the conversation without talking about MiCAR. That’s a big topic.

Probably nobody has a full comprehension or handle on it, but just shortly on your perspective, how are you approaching it? How do you think about it? What is it going to mean for Coinmerce and what you do?



MiCAR is a critical stepping stone to the more full MIFID licenses that will come afterwards.

So it’s great for both the regulator and professional parties from the crypto financial ecosystem to kind of find our middle ground.

And with them, of course, we got quite a lot of this space to be able to scale to it throughout this years.

And where I see the biggest challenges, at least from a Coinmerce Group perspective is that from a Coinmerce Group we have our brokerage side, which of course requires to be fully compliant under MiCAR.

We have Coinmerce Capital as an asset manager. There MiCAR is not something that is extremely critical because we’re mainly aiming for an AIFMD license. There’s a different kind of a regime for an asset manager.


And of course, our trading tech and all our other service companies, they also require MiCAR.

And that I can see from my team, especially from compliance, regulatory, legal, that this is not just seen as a very great challenge to work alongside it, but this excites them.

And I think that when you look at…



People that get excited about compliance and regulation are somewhat special, shall we say, but understandable.

Some people say that MiCAR will be kind of like an iron curtain over Europe, kind of maybe cutting off some of the international global connections for crypto into and out of Europe. Do you see it that way or?



No, I actually think on that I might be a bit contrarian.

I think that from how MiCAR is moving, and again, if you’re asking any regulator, they’re very open in saying that’s not the final.

So there’s still going to be a lot of movement to get out there.

But it’s also their feedback to our request. We, throughout the years, requested the regulatory supervision for our markets. And we can’t, at the last minute, say, “Well, you know what, we would love to keep the… Yes, but…”

If we, as we have, throughout the years, requested supervision, we should man up and step towards it.

Where I see challenges, maybe less with just MiCAR itself, but if I look at AML6, that could restrict a lot of the DeFi ecosystem within the European perspective.

And that is a worry.

But I know that we are talking very actively with regulators, not just in the Netherlands, but throughout the SEPA region. I’ll be also participating in the ECB’s open discussion coming up this month as well to provide the feedback, “Hey, we are happy with what you’re doing. Are you aware that ABCD and so on and so forth needs to be modified?”

But we got to the point that we’re discussing about the way to compose an article rather than having the article to begin with. And I think that’s a good. Some progress.

It is some progress. And congratulations. There are a lot of challenges that are coming with MiCAR.

It will not be as…

Let’s see for those that are willing to do the same in the States. Unless you want to do it in Asia or other jurisdictions that are also great, but it’s not the same. And I think that, again, going back to larger allocators and asset managers, as an asset manager, it’s important for me that I can go and say, I comply with MiCAR.

And therefore you can trust that we have the capacity, the team, the right structure and the right partners to serve your portfolio and your mandate.

And having that, MiCAR does help a lot.



That is good. Let’s come to the final question. It’s a question we ask all of our guests on RULEMATCH Spot On.

Is there something out there, either with your company or in general in the space that is happening, developing under the radar, maybe unnoticed by most people, that we should watch out for or that we could look to see in the next 6, 12, 18 months?



I can’t give financial advice, especially not if it’s from… I’ll leave all the token side maybe to decide, but if I look at exciting companies, exciting projects that are coming out, you see quite an interesting rise of traditional dark pools.

And I find them as kind of an additional step at least from volumes perspective and maturity of our ecosystem, the role of dark pools is going to become very, very, very potent in the coming years.

And the parties that stand behind them, a lot of your usual traditional suspects are very much already in it for the past six months with the development.

Hardly any noise about it.

But knowing and especially having good colleagues from some of those parties, it’s exciting.

It’s really exciting to see that entry and the sizes as well.

I’m very much looking at that. I’m sure that maybe in the eco -sustainable we told, it’s the OTC desk. Yes, they’re also super exciting. So are mushrooms now after the rain.

But dark pools are something that are a bit under the radar.

And at least from putting a trading hat on, very exciting to see that.



Interesting, interesting.

Maybe we’ll have to come back and have a further conversation about dark pools and other adjacent topics in the future.

Wilhelm, thank you very much for being our guest today. Thank you for having me. Very interesting. And stay tuned for more episodes of RULEMATCH Spot On coming up soon.