The “ask for forgiveness, not for permission” mantra is just about dead, an interview with Albert Forkner, former regulator turned CEO of Fortress Trust
Albert Forker was previously the Banking Commissioner at the Wyoming Division of Banking where he oversaw the state’s emergence as a leading regulator of digital assets. He is now the CEO of Fortress Trust, which provides API-driven financial, regulatory, and e-payments infrastructure for Web3 innovators. You can find Albert on LinkedIn and Twitter.
The Interview
The Axial Studio
To start, we’d love to hear more about your story. How did you come to be a regulator?
Albert Forkner
I'd like to say after watching It's a Wonderful Life, and seeing the bank examiner there, that that led me into being a bank examiner. But unfortunately, that's not the case. I had no idea what bank regulation was in college. In college I bounced around a little bit and got into finance and economics, and thought “that'll land me somewhere on Wall Street.” But that didn’t pan out and a friend of a friend told me about an opening at the Wyoming Division of Banking. I thought “what is that?” But I didn’t care, it was a job. So that's how I became a bank examiner right out of college and spent just shy of 25 years as a regulator. I went from not understating bank titles, national banks, and dual banking to seeing everything evolve from 1996 till today.
The Axial Studio
As the first state regulator we’ve interviewed, could you describe what dual banking is for the audience?
Albert Forkner
States charter just shy of 80% of banks, and very much smaller banks. The national banks are much fewer, but hold about 65% of the assets and are supervised by the OCC. So the small banks provide much of the small business lending at a smaller scale, and the large banks provide the scope and scale for the largest corporations in the nation.
The Axial Studio
Do you have a regulatory philosophy about the role of regulators in the system?
Albert Forkner
If you think about the regulatory process, you’ve got policy makers whose job is to set the policies on a federal or state level that is enacted through statutes. Regulation is then created to guide how policy is administered and implemented. Regulators are charged with administering the laws and regulations that are passed.
The Axial Studio
You’re in a very unique position, having been a regulator and an operator. For people who aren’t coming from regulated industries, what are some of the misunderstandings people have about working in regulated industries and with regulators?
Albert Forkner
Regulation does not address every possible scenario, specifically in a rapidly evolving ecosystem like the digital asset space. So regulators are working with regulations that may not have contemplated how things are operating in 2023. Another misconception is that you cannot just say “it’s just code.” In our case with Fortress Trust, we are a non-depository trust company. So we are regulated as a financial institution whether we like it or not. There are regulations in place and we are providing a financial service, we have financial products that not everyone appreciates especially if they are not dealing with the regulatory side each day.
The Axial Studio
What advice would you have for founders just starting off in this industry, who don't have much previous experience in a regulated environment?
Albert Forkner
I think you have to survey the landscape. So if you’re just two people in a garage, and your background is in computer engineering, and you have come up with a new type of financial product, then it’s important that you figure out the regulator landscape. Honestly, sometimes it’s as simple as Googling it and seeing what comes up. But where I think the breakdown often occurs is that people understand that they are creating a lending product, payment product, digital asset exchange, etc. and they don’t figure out what organization oversees that sector. You have to find out who that is early on.
I know regulators, myself included, would say “come talk to us early and often.” That is good advice but I know there is a lot of reticence out there because people are worried your words will be used against you. But I think it’s still good advice. Regulators have also realized that we’ve got to set up a mechanism that allows people to explore and engage with the industry, so you see offices of innovations at many regulators. So there are avenues for engagement, but you have to look for them.
Another point founders should consider is that you have to plan for the cost of compliance because there is a hard cost. There’s a hard cost to get started and a hard cost to continue your business, and you have to build that into your capital planning.
The Axial Studio
Last question from us, what are you optimistic about in this space?
Albert Forkner
Some of the things going on now are really not too dissimilar from two things: cannabis banking and money service businesses (MSBs). Back in the day regulators thought that MSBs were just there to launder money around the world. So there was a big push to keep them out of the banking system. So this is similar, the problem is that it's so fast moving right now.
I'm optimistic about the fact that there's now more of a focus on compliance. The “ask for forgiveness, not for permission” mantra is just about dead. The regulators are also realizing, we can't just ignore it and hope it goes away. All of these things are going to help advance financial services. It’s times like this that help clear out the pipes. Just like traditional financial services, every now and then you need to flush out those who shouldn’t be in the space and this is really no different. There’s a lot of noise, but it needs to be flushed out. We are really witnessing the evolution of financial services. White it’s daunting, it’s also cool to be part of that and see that.