Didier Lavallée is an accomplished financial services executive with experience in the capital markets and custody sectors with companies such as RBC, UBS and Genuity Capital Markets.
Earlier this year he left the traditional banking world behind for a role as the CEO of Tetra Trust. Didier was drawn to the emerging crypto market and world of DeFi (decentralized finance) due to the inefficiencies he saw in TradFi (traditional finance).
Tetra is a young company but has earned credibility as Canada’s first qualified custodian for cryptocurrency and digital assets. Backed by both TradFi and DeFi industry players, the company is working hard to deliver the most advanced digital asset storage technology in the industry and has begun to prove out its business model with customer announcements.
In this Q+A we take a look at what Didier sees for Tetra and its approach to the crypto space.
You’re a traditional banker who has made the leap to crypto as Tetra’s CEO. How’s it going so far?
DL: It’s been an incredible transition and I consider myself fortunate to be able to lead Tetra. After 16 years in TradFi and with the last four in asset servicing, I came to understand how ineffective our financial infrastructure is. There’s a tremendous amount of operational risk that the average person doesn’t see and I wanted to help fix this so my children can one day transact on a safer and more transparent financial stack.
I’m also fortunate to have strong partners—both inside and outside Tetra—that share our vision to build better digital infrastructure.
Of course, the recent market volatility has presented challenges for the industry, but I did come into the role knowing a correction was likely imminent. There was a lot of hubris in the space and after many years in financial markets, I have come to appreciate all aspects of market cycles, including bear markets.
Tetra is a young company in a new market. Tell us about the company and what it does?
DL: Tetra is a Trust Company and is Canada’s first—and still only—regulated digital asset custodian. We offer clients the capacity to store digital assets (20+ coins, hundreds of tokens and NFTs) across a series of technology solutions that include anything from cold to hot storage. Tetra is also industry leading for its compliance framework which include SOC 2 Type 2, Audits, and Proof of Reserves. This standard is applied to all services Tetra offers.
Who are your target clients? Are you gaining traction with them based on your offering?
DL: Our target clients are institutional investors, high net worth individuals and companies looking to participate in digital assets. We can service a wide array of clients given our unique technology portfolio and can customize a multi-solution product to fit our client’s needs. It’s one of the great strengths of Tetra, being able to tailor a solution based on our client’s needs, all while operating as a regulated Trust Company. All other custodians have a single offering. That approach has pros and cons but never offers a complete solution—Tetra can service all their needs and reduces the friction of having to source multiple providers.
And while the Canadian landscape is well defined in terms of client segments at the moment (e.g. Miners, ETFs, Asset Managers, etc.), we’re also very excited about digital asset adoption for TradFi organizations and corporations. Tetra spends a lot of time discussing and educating asset managers, banks and large companies on digital assets as we strongly believe the next adoption cycle for digital assets will penetrate both TradFi and corporations further.
It’s specifically noticeable in this downturn as we’ve seen the majority of larger organizations either continue to build their digital assets teams or accelerate.
What does being a “qualified custodian” mean to your business? How do you protect your clients and their digital assets?
DL: Tetra is registered as a Canadian trust company under the Loan and Trust Corporations Act (Alberta). What this means is that Tetra is a fiduciary to its clients, responsible to act in their best interest, and its operations are overseen by a Canadian regulator. As a fiduciary and trust company, our clients’ assets remain in their ownership at all times and Tetra never has the ability to take ownership. Tetra is also the only Canadian Custodian being able to custody entities that must adhere to NI 81-102 and NI 31-103.
Being regulated is in our DNA and we believe that is one of the key pieces that sets Tetra apart from the competition. Not only do we offer different kinds of storage (from hot to cold) across multiple technology platforms, but we do so under a regulated Trust Company framework recognized Canada wide. Finally, everything we do is on the back of client instructions – which is an important piece given what we’ve seen in the market in the past few months.
Is it a given that Canadian institutional clients will move to a Canadian custodian? How much of the digital assets outside Canada could be repatriated?
DL: There are a few factors that still lead to assets being held outside of Canada, namely product offering, scale and an uneven framework across the Canadian regulatory landscape. Over time, we believe the regulatory landscape will level and that will give better opportunities for Canadian companies to be competitive. Canadian custodians can also close the gap in product offering by continuing to innovate, and with support from our regulators to push the products forward.
I also believe an important point for any Canadian institution to consider is exposure to the U.S. regulatory environment—which is still very uncertain—and cross-border litigation in the event of bankruptcies. There’s an important exercise that needs to happen about weighing the risk/reward of holding assets in the U.S. versus in Canada with a Qualified Custodian.
So I believe there’s a large opportunity for asset repatriation to Canada but a few things need to move in our favour.
What about your competitors? Who else plays in your space?
DL: We really think about the competitive landscape in 2 buckets: International and Canadian. When we look at the international players, their scale and product offering is quite robust—and there’s no doubt we have catching up to do. Being smaller, nimbler and offering better client centricity is part of our value proposition. At Tetra we pride ourselves on being partners to our clients and make sure we assess their needs when building our product roadmaps.
In Canada, there are a few niche players that have built businesses over the past few years. There again, Tetra’s value proposition is stronger being the only regulated custodian (able to service both entities having to adhere to NI 81-102 and NI 31-103), having a versatile suite of technology that far surpasses anything our peers have to offer, and our overall governance model.
That last point is extremely important given Tetra focuses on the institutional portion of the market and any organization with a fiduciary mandate to protect client assets must heavily discount providers with low corporate governance and that are unregulated. And while Tetra has SOC 2 Type 2, we don’t believe that is something that sets us apart as many players had it before us and we believe it is a necessary standard for any custodian to operate at this point.
Overall, I’d say Tetra would like to see more players get regulated in Canada as we believe it would create a stronger ecosystem, evolve and provide regulatory clarity, and help keep assets domestically.
You’ve made a number of announcements with partners and clients. What should we expect next from Tetra?
DL: We’re very proud of what Tetra has accomplished since getting its QC license and we’re excited about what’s to come. Being the only regulated Canadian entity opens a lot of doors since it gives comfort to institutions that we’re operating with a proper control framework.
Additionally, the solution we have in development is completely unique and far exceeds any single offering in Canada. We believe that having a portfolio of solutions allows us to tailor products based on our clients’ needs.
In terms of what comes next, I would expect more best-in-class partnerships to round out our portfolio and validation from large Canadian institutions.
Will you be looking for other partners to further expand or broaden Tetra’s offering?
DL: Tetra will continuously look to improve its product offering and partner with best-in-class providers. We are in the final stages with a few partners we’re excited to see join Tetra and already have a great portfolio with Ledger and Knox. The proprietary technology Tetra is building will also allow us to continuously evolve with the market based on client needs. This is also incredibly unique to Tetra as all other providers have a “take it or leave it” approach.
We see the crypto world grabbing news headlines as of late. Does this provide new opportunities for Tetra?
DL: If you look at what happened globally in the last couple months, we believe it solidifies the need for a stronger regulatory framework, especially in certain areas like custody of assets. Going back to my earlier comment, why would any institution with a mandate of safeguarding clients assets deal with an unregulated player or even in a region where the regulatory framework is in flux.
In terms of opportunities, I think it helps validate our approach—being regulated—and certainly is an opportunity to continue to educate various stakeholders about the risk that may exist when dealing with unregulated players or non-Trust companies.