By Steve Gelsi
LevelField CEO Gene Grant is steering his company toward a potential IPO as a bank that offers digital currency services
LevelField Financial is set to announce Wednesday the acquisition of registered broker dealer Netshares Financial Services LLC for an undisclosed sum as part of its effort to build itself up as a traditional bank that handles digital currencies, MarketWatch has learned.
On another front, LevelField Financial has also hired PNC Bank (PNC) as an adviser on a potential acquisition of a U.S. chartered bank, company founder and CEO Gene Grant II said. LevelField is in talks with two potential bank targets which Grant did not name. He expects to close a bank acquisition deal early in 2023, based on the usual regulatory approval process.
In terms of capital raising, LevelField is currently seeking a $50 million venture capital round with commitments from existing investors including Houston-based family office Arbroath Capital and institutional investor Alumni Ventures Group LLC.
LevelField is making these and other moves to position itself not as a crypto bank, but as a financial firm that accepts that about 16% of the U.S. population holds digital assets with a need for banking services.
“There’s a reluctance by banks to get into digital assets,” Grant said. “We’re not a crypto bank targeting niche customers. Early movers like us who fully understand this have an opportunity.”
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LevelField’s acquisition of Netshares will add its business as a registered broker-dealer with a crowdfunding portal, pending regulatory approval. Netshares is one of the very few firms with the ability to do regulated tokenized and Reg A securities deals, Grant said.
Reflecting on his 30-plus years in financial services, fintech and banking for firms including Deutsche Bank (DBK.XE), Banco Bilbao Vizcaya Argentaria SA (BBVA.MC) and Standard Chartered , LevelField CEO Grant said he’s been struck by the reluctance by many banks to accept that market conditions have been changed by digital currencies.
Established banks are also ignoring the impact of digital currencies on their potential and existing customer base, he said.
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Long path to digital currencies
Grant’s career highlights prior to LevelField include being recruited by Deutsche Bank in 1996 to work on the firm’s interest rate derivatives and fixed income trading in London. He ended up working under legendary Deutsche Bank executive Bill Broeksmit, who was depicted in the best selling book, “Dark Towers” as a force for reform at the bank.
Grant said he was the main mover behind the 1996 establishment of Deutsche Bank Middle Office, a group between the trading side and the bank office that conducted risk management.After he left Deutsche Bank, Grant was CEO of E-primefinancial Plc between 1999 and 2001 and helped take it public in London. While the company wound down after he left, the experience helped Grant build his exposure to digital banking combined with traditional banking.
After several senior roles at banks, Grant in 2017 decided to do a deep dive into digital currencies after some prodding from company co-founder and friend Stephen Helmholz, who now works as president, digital platforms, for LevelField, as well as Grant’s son Gene Grant III, now head of retail platforms after co-founding the company.
“I was shocked by the sheer amount of money in the asset class and horrified at whose hands it was flowing through,” Grant said. “They didn’t know about fiduciary duty or were knowledgeable about financial services. It became clear that I (we) could do a lot better.”
In 2018, LevelField raised a pre-seed round of funding of about $840,000. An offshore investor was supposed to close on a $10 million commitment in February of 2020, but the deal dried up during the COVID-19 lockdown.
LevelField finally closed on $8.5 million in funding in February (2022) with lead investor Arbroath Capital and participation from Alumni Ventures.
LevelField currently employs 21 people full time, with an average age of 50 and about 40% staffed by women.
Looking ahead, Grant said he’d like to either take LevelField public through an initial public offering as soon as 2025, or possibly sell the company to a larger bank down the road.
LevelField is readying the launch of some digital asset products. In September, it’ll unveil On and Off Ramp, an advanced trading platform. It’ll soon start offering bitcoin custody and private client trading services.
It’s partnering with IBM (IBM) to provide digital asset custody services as a white label service for banks for a planned launch in 2023. Banks will license the technology to offer digital asset trading and custody to customers.
Grant sees wider digital currency adoption ahead for the U.S. banking system as the U.S. Federal Reserve takes aim at creating a central bank digital currency.
With digital assets and central bank digital assets, the banking system will move away from centralized financial structures such as the Fed’s clearing system or private clearing houses or the ACH network. The central bank’s stable coin should instead offer real-time, peer-to peer exchanges for 24 hours a day and seven days a week, he said.
“It’s better technology,” Grant said. “The USA is the largest capital market in the world because of our regulation, and not despite it. Whether it is because of the regulatory system, or because of FDIC insurance, the U.S. banking system is trusted. I do not know anyone who actually likes their bank, but they trust them.”
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