Through our close-knit relationships across our firm our full range of expertise is at your fingertips. Helping you deliver first class service to your clients across their personal and business worlds. Jenny Sargeant, partner lead of our specialist private banking team sits down David Lee, a senior associate specialising in digital assets and blockchain.
In a nutshell what’s your area of expertise?
I am a corporate lawyer but early in my career I picked up an exposure to and interest in cryptocurrency and digital assets. I have spent the last decade enjoying helping businesses solve the novel issues facing the sector.
When do you come across private banks or their clients in your practice?
Private banks have been a crucial enabler in supporting their private capital clients investing in and setting up new businesses. They offer a personalised risk-based approach (particularly where there are cross jurisdictional factors) which mainstream bankers cannot and are well placed to navigate the more bespoke needs of growth businesses. I see this particularly in the rise of tech and digital assets businesses. When this market was new and emerging, corporate banking would often be provided by private banks, some of whom have specialised in the sector. We are also seeing shifting trends in private capital, particularly the increasing role of the next generations within private capital families developing a particular interest in digital assets and are wanting to increase exposure as part of a diversified portfolio. At this later stage of growth of the market (and the transfer of wealth within families) it is common for private
capital families to hold digital assets within their portfolio and be looking
to their private bank to include these assets within their wealth strategy. This gives an opportunity for private banks to capitalise on – both in extending the scope of existing relationships while also generating new ones.
Are we seeing an increasing impact on wealth management because of the rise of digital assets?
Yes, we are at the point now where we are seeing digital assets touch on all aspects of life for private capital families. That ranges from initial investment decisions, potentially divorce and division of marital assets, through to succession planning. Often investment in digital assets goes hand in hand with a key individual having the sector experience and knowledge to be able to manage the assets. When they are reallocated to others (for example to a spouse in a divorce, or to children as part of succession planning) it is important to plan for how the asset will continue to be managed and safeguarded. This is particularly important because digital assets are ‘bearer’ assets and title is determined by who controls the asset, and so security becomes a key consideration. Compounding this, asset values fluctuate a lot and therefore assets need to be accessible if they are going to be traded, a delay could quickly cause a significant loss in value. In dispute situations (such as divorce) it is also important to know what questions to ask to identify signs that digital assets are potentially held by a party and, on the separation of assets, ensure there is understanding of the value and volatility of the assets. An opportunity for private banks is helping clients access the expertise to manage these assets as part of developing their wider relationship with their clients. This is particularly
relevant building and maintaining relationships with spouses postdivorce and with next generational wealth. The institutionalisation of cryptoassets means there are more ways for private banks to interact with the sector while managing risk and exposure, for example, the use of professional custodians and outsourced trading.
And do you anticipate an increasing impact of wider private banking services?
Traditionally there has been a significant divide between technology and blockchain, and financial services and digital assets. However, we are seeing increasing convergence where blockchain is another part of tech and crypto is another part of financial services. The easiest example is the use of stablecoins (which are in the course of becoming regulated), significant money flows (such as Western Union) are now made with US dollar stablecoins, to avoid transactional friction. A stablecoin is a type of digital asset that (unlike cryptoassets which fluctuate in value) is pegged to a traditional asset such as US dollars, though increasingly tokenisation of money market funds is also being explored. The stablecoin has been developed, as its name suggests, to be a stable store of value and so can be used more reliably in transactions for payment without the inherent volatility of a ‘traditional’ cryptoasset. The impact of increasing use, use becoming more mainstream and regulation will be that we will see increasing numbers of families expecting to be able to use stablecoins. We will also see low fee transfers starting to use stablecoin in the background rather than traditional payment rails (e.g. SWIFT) which will support the emergence of new financial services products and fuel change within the sector. What we used to see was financial services on the one hand and cryptoassets on the other but we are going to see these trends converge and the pace of change is rapid.
Can you give an example of where you best add value?
We work well with existing and new businesses but love to be involved where there is a blank sheet of paper as we can help navigate regulation and structure businesses to be capital and time efficient. We also work well where businesses are looking to expand into new markets whether or not they have
an existing blueprint.
Do you have a mantra or saying that best describes how you work?
Be forward thinking. When I started, I understood cryptoassets and so became the bridge between the digital asset world, the client and experienced lawyers in their respective sectors or markets. Alongside, I helped build familiarity with tech and new terms and concepts within the relevant specialist teams.
What do you enjoy most about what you do?
With the constant evolution of the market, it is impossible to be an expert in everything. Having worked in the sector for over a decade, my understanding and experience of the cryptosector expands every time I work with innovative entrepreneurs to help them set up their businesses – they’ve usually done a deeper dive on the market niche or problem they are solving, so it is great to expand my horizons in the process.
What do you think is key to assisting UHNW families in your area of expertise?
When the digital asset market was emerging the key need was of education within families (and advisors). Now the assets are more mainstream and the next generation (being at later stages of maturity) have a stronger voice within families and key roles within businesses. There is a higher baseline knowledge generally. Now the key area of assistance needed is in understanding the life cycle of the investment class, the practicalities of an investment and to anticipate where it has best value and to incorporate this into wealth management and business strategies.
What would be the “one thing to watch out for” coming ahead in your area?
The impact of the next stage growth of the digital asset market converging with other growth trends. For financial institutions to become involved in the digital asset market there needs to be regulatory certainty, which is now coming (in
line with the market becoming more mainstream). Bringing a wider pool of capital to the market would fuel next stage sector growth and drive innovation through the confidence to combine digital assets with regulated financial services products. Throw in the impact of agentic AI (producing AI agents acting on your behalf that could use cryptoassets, including stablecoins, as an autonomous payment mechanism) and you have a sector primed for significant
evolution, if not revolution. To imagine this impact, I use the example of the early days of the internet. No one faced with a text only, limited access network (as the internet was in its very early stages) could envisage current social media platforms. These instead came from iterative developments, each building a different part of the infrastructure we now take for granted. This is the stage we are at for digital assets – the infrastructure is there, and it is now an accepted part of society. We will see ever increasing sophistication of operation and on the back of that expansion from the “techy” and “investor” to the mainstream. The convergence of traditional financial services and digital assets, the increasing use of AI and openness of the next generation of wealth who understand and are comfortable using digital assets will accelerate all of these trends. A key characteristic of this emerging wealth generation is “immediacy”
and globalisation of lifestyle. With other aspects of life now seemingly instant, the globally mobile entrepreneur and high net worth individual, alongside international businesses, will expect the same from their bankers. Clearly private banks are best placed to leverage this one global banking relationship mindset.
Our connections across our firm are here to provide you with all the expertise you need so if you want to continue any of these conversations or have any digital asset or blockchain queries, please feel free to get in touch with David.
For more information about our Fintech please visit our website here.
For any Private Banking related queries please contact Jenny Sargeant.
