Former U.S. Treasurer Rosie Rios Aims To Break ‘Glass Walls’ Of Closed-Off VC World

The story of how small-money investors galvanized by an Internet message board, a gamified trading app and a little flash-mob-style activism rewrote the rules on retail investing — while driving shares of GameStop through the roof — is now part-finance fable, part cautionary tale.

In a recent wide-ranging conversation with Karen Webster, Rosa “Rosie” Rios, 43rd Treasurer of the United States and newly appointed board member of blockchain and cryptocurrency solutions firm Ripple, discussed the perils and payoffs of democratizing market access, especially for women and people of color that face what she called “a glass wall, not a glass ceiling.”

The recent Robinhood-GameStop dustup serves as an example of what individual investors would do more of across the board if finance was more democratized, she said.

As Rios sees it, “the theme of Robinhood, which is giving access to a group who perhaps never had access to something before with these no-fee trades, was actually very innovative. It really disrupted how the larger institutions thought about trades. Whether it was Fidelity or Schwab, they followed this disruptor, [and] I think that alone is the key message.”

However, she added that given what happened “specific to GameStop and Reddit … I think there’s still a lot of work that needs to be done when you have anything that innovative.”

Voicing concerns over the power of social media influencers leveraging connected app tech to encourage naïve investors to sink savings into speculative new asset types, Webster asked how regulators should define and police the space to head off investor “carnage” downstream.

Hinting that we may see more such small investor rebellions in the near future, Rios said, “the thing about government and regulators is it’s not usually preemptive, it’s usually reactive. There are many other disruptors out there in the payments space who have yet to have that kind of critical path forward in a way that has been vetted and … prepared with good guidelines.”

“If anything, I think [this is] a learning process for everyone. I have a lot of faith in [SEC Chairman] Gary Gensler and [the Biden administration] in terms of starting these conversations, because they really haven’t started,” she said.

Depicting the crypto craze as “the wild west of the internet … just beginning,” Rios also told Webster that it’s “our responsibility as parents, as educators, as officials, to think about how to move forward [with crypto, connected] in ways that makes sense,” without slowing innovation.

Hunting Unicorns, Championing Crypto, Battling For Access

Citing the pros and cons of social media — from its role in the campaigns of the first African-American President to allegations of election interference in recent years — Rios told Webster that tech innovation is a two-edged sword creating both risks and rewards. “I do think that the next wave of job creation is still going to be in that innovation space, whether it is cyber, whether it is crypto … whether it is artificial intelligence, that is the wave of the future,” she said.

In a bid to accelerate this envisioned coming wave of inclusive innovation and to move financial access into the limelight, Rios co-hosted the streaming show and channel “Unicorn Hunters.” Borrowing a bit from ABC’s “Shark Tank,” rather than investing in entrepreneurial retail products, “Unicorn Hunters” lets the casual investor participate in a pre-initial public offering (IPO) investing. That chance came up after Rios served on the Biden Administration Treasury transition team.

“The VC world, the seed funding world is a very, very closed system, even for financial institutions who have access,” Rios said. Bringing these opportunities to the casual investor while encouraging research and a good grasp of the risks involved creates opportunities for those who have historically had little or no access — particularly women and people of color.

Such efforts are important, but Rios referenced recent reports on venture capital funding as proof that there’s a long way to go. “Of the $150 billion allocated by VCs in 2020 only 2.2 percent went to women,” she said.

As for her new role on the Ripple board of directors, Rios said blockchain and crypto hold immense potential for the kind of access and inclusion that she’s spent her career advancing.

Calling it an option “whose model is set up to do some good,” Rios told Webster that “I chose Ripple because I strongly believe it is one of the few cryptos providing a legitimate and credible form of facilitating cross-border payments in a way that’s never been done before. It’s obviously used by financial institutions. It’s used globally. To take that application and provide it as a very good and viable resource for many people across the globe … is a good thing.”

A Framework For Securing Blockchains

While crypto can democratize global access to financial systems, onboarding tens of millions currently cut off from the connected economy; it’s also a major crime opportunity. As Webster put it, “bitcoin’s big use case is the currency of crime on the dark web. It still remains that way. There wouldn’t be ransomware as a service if there wasn’t Bitcoin as a currency.”

Invoking the acronym cloud of DOJ, SEC, CFPB, CFTC, FinCEN and other agencies tasked as watchdogs but still lacking an enforcement framework, Rios said, “I think it’s going to be a collaborative effort between the public and private sectors. There’s still a lot of work to be done in terms of really knowing what’s behind the curtain, how blockchain really works, how unfortunately … cryptos are used to fund the dark web and other illicit activities.”

“For someone who’s been working on our nation’s currency design [since 2008], just to put that into context, here we are 13 years later, and again, government usually isn’t a leader, it’s a follower. That’s going to be the case for crypto,” she said. “All we can do is hopefully move the conversation in the right direction.”