Vantage Bank is not wary of cryptocurrency

Traditional banks have been wary of cryptocurrency.

Digital currencies like bitcoin and ethereum involve blockchains, the distributed ledger systems maintained by computers around the world using cryptography to securely store and verify data.

Amid a national crypto craze, some Texas banks are experimenting with digital currency, seeking to offer customers and staff ways to invest and store virtual assets.

San Antonio-based Vantage Bank announced in March it was offering bitcoin savings plans for its employees. Bank staffers can now opt into the plan set up by NYDIG, a New York bitcoin financial services firm.

“Part of offering our team members the most comprehensive benefits package possible is making sure we evolve with new financial technologies,” said President and CEO Jeff Sinnott.

The Texas bred former software engineer joined Vantage Bank in 2018 as chief operations, technology, and enterprise risk management officer. He helped the bank complete its merger with the former Inter National Bank in McAllen, expanding to $1.9 billion in total assets.

Vantage Bank has since grown assets to more than $3 billion, according to its 2021 annual report. It has 23 statewide locations, including offices in the Rio Grande Valley, Laredo, El Paso and Forth Worth.

Sinnott, 50, said he wants the bank to play a role in and profit from the new “Wild West” of finance. While he doesn’t believe crypto will replace the US dollar, he knows investors are increasingly looking to banks as a partner they can trust.

He sat for an interview with the Express-News last week to discuss how he’s leading the bank’s charge into the decentralized world of crypto. The following has been edited for length and clarity.

Jeff Sinnott, president and CEO of Vantage Bank, is offering a Bitcoin savings plan for employees and leading the institutional charge of investing in blockchains and cryptocurrencies.

Q: Why did Vantage Bank start researching blockchains and crypto?

A: Within the next five years, we feel blockchain is going to be a technology that disrupts many industries including financial services. As the business cases evolve, we want to be at the table. We want to be involved with shaping the opportunities. We are working with several key partners on proof-of-concept initiatives.

Q: Crypto purists say they would rather deal with blockchains, since they were created in part to get around banks and government regulation. How do you see the bank’s involvement?

A: There will never be significant mainstream adoption of bitcoin unless the US government supports the cryptocurrency. For whatever cryptocurrencies are around for the long term being used for value exchange, I think it’s safe to say there will be a framework to better protect customers and monitor transactions. Banks are a natural fit to facilitate that as they do today with fiat currency.

Q: Why did the bank offer a crypto savings plans for its employees?

A: We are always looking to enhance our benefits for our associates. We’ve been receiving feedback from them, especially our younger associates, on their interest in bitcoin. Working with one our partners, NYDIG, we were able to provide an easy, no-cost means for our associates to direct post-tax dollars to a bitcoin savings plan. Of course, we offer education to our associates regarding risks and considerations.

Q: Why are you offering the savings plans in Bitcoin?

A: We offered this benefit exclusively to bitcoin because it is the gold standard cryptocurrency for store of value. Like gold, it is difficult to mine, it has limited supply, has an established framework to protect ownership and utility to exchange for other goods. We’re also working with partners such as Backbase (an Amsterdam-based financial technology company offering digital banking platforms) and NYDIG to eventually allow our customers access to bitcoin through Vantage Bank’s digital engagement platform.

Q: Ethereum is the blockchain independent of bitcoin’s blockchain that has its own currency, ether. It’s been compared to a smartphone that can run according to the apps built on it. Why is the bank interested in using ethereum?

A: Ethereum is really the blockchain platform of choice for business application and smart contracts. When we’re creating digital assets on the ledger, ether is the crypto behind that. We have a proof of concept active today used to create NFTs (non-fungible tokens) from attributes of commercial loans. (Ethereum can be used to store self-executing code known as smart contracts, which allows buyers and sellers to come to an agreement on the blockchain without banks or other third-parties.)

Q: Is the bank currently working on blockchain projects?

A: The bank has several partners involved with blockchain. Alpha Ledger Technologies (a Washington-based company providing a digital asset bond marketplace), is one of our partners. The bank’s digital loan origination platform breaks down the key characteristics of every one of our loans, the data attributes, every associated document. That allows us to load them onto the blockchain. Down the road, we feel this will set the rails for numerous pursuits.

Q: How will the bank work with Alpha Ledger Technologies on blockchains?

A: We could leverage the Alpha platform for loan syndication or loan participation arrangements. We could originate commercial loans to the platform to have other banks participate in those loans. This provides complete transparency and near real-time, simultaneous access to all salient loan data with very little overhead.

We are also looking at doing a mortgage program through this platform allowing improved access for alternate investors rather than selling them to the traditional, limited pool of investors.

Blockchain significantly reduces the obstacles for investor access. Right now, there’s burden of middlemen. It’s a clunky process. There’s a lot of overhead. And there’s also limited access. So what we envision is that by using blockchain it breaks down those barriers. There’s no middle man. It gives accessibility, in this case, to all banks as well as alternative investors.

Q: How has the bank been received by crypto investors and miners?

A: Early on, it was very surprising a banker was in the room with crypto stakeholders because people would say, “This isn’t about banks. This is about decentralized finance.”

That mindset has changed significantly in the last 18 months. These companies know that crypto mining takes an incredible amount of capital. In order to be competitive you have to build a critical mass. Eventually, all the bitcoin and primary cryptos will be going through these huge data centers. They’re realizing that they do need investors, bankers to finance this infrastructure.

For the crypto platform plays, there’s a couple of reasons why we’re at the table. Platforms hit a certain penetration level and then they plateau. They hit a level of those that are willing to allocate so much bitcoin and then they start to have questions of trust. Does going over a certain amount make sense? How much am I willing to risk? There’s this understanding happening, even with the bitcoin purists, that some regulation is positive because it gives people confidence for the long-term. We naturally see banks step in as the partner that customers trust.

eric.killelea@express-news.net

New Technology Era

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