Dive Brief:

• Andreessen Horowitz poached two top executives from the Facebook-backed Novi digital wallet operation to work as chief technology officer (CTO) and chief information security officer (CISO) for the venture-capital firm’s crypto funds unit, a16z Crypto.
• In an online statement, Andreessen Horowitz announced that Riyaz Faizullabhoy was named as the crypto unit's CTO and Nassim Eddequiouaq was appointed its CISO, noting that they worked together for years at multiple companies "to build world-class security systems in complex regulatory environments." 
• "We began searching for a world-class security leader to consult with the projects in our portfolio and help our own operations scale in a crypto-native way, and were doubly fortunate to find a pair of them instead," a16z Chief Operating Officer Anthony Albanese wrote in the firm statement.

Dive Insight:

Andreessen Horowitz's a16z's three crypto investment funds have about $3 billion under management, according to the California firm's web site. Its crypto team has grown to about 50, including outside advisers, Albanese told the broadcast outlet CNBC. The team has made three dozen investments, including in Diem, the Facebook-backed crypto currency network tied to Novi; the crypto exchange Coinbase; and the blockchain company Solana, according to its website.

"Andreessen Horowitz has shown an impressive dedication to advancing the entire crypto ecosystem over the past decade, and we jumped at the chance to join their premier team and provide technical support to their rapidly-expanding portfolio," Faizullabhoy told CNBC in a statement.

"We'll be advising portfolio companies to help them make sure that they have the most secure and sophisticated systems around," Eddequiouaq wrote on LinkedIn. "I simply cannot wait to support and advise amazing founders who build the future of web3."

The digital currency project Diem and its wallet Novi are not strangers to turnover. Morgan Beller, a co-creator of Diem, left her role as head of strategy for Novi in September 2020 to join another venture capital firm, NFX, according to CNBC and LinkedIn. Also, Kevin Weil, Novi’s vice president of product, left in April to join Planet Labs, a satellite imagery company, according to his LinkedIn profile.

The executive exits also aren't the first bit of adversity for Facebook’s digital currency effort. Lawmakers and regulators worldwide raised concerns about the money-laundering potential of the project, formerly known as Libra, nearly as soon as it was announced in June 2019. Further warnings from U.S. senators may have persuaded several of Libra's original backers, including Visa, Mastercard, Stripe and eBay, to drop out of the Libra Association.

The association scaled back its vision for the crypto project in 2020 in response to regulators' concerns, and last December rebranded itself Diem Association (and renamed its wallet Novi, shifting from the original Calibra name). But its payment subsidiary, Diem Networks, still encountered difficulties in its effort to win regulatory approval from another regulator, the Swiss Financial Market Supervisory Authority, for operations formerly in Switzerland.

Diem Networks in May withdrew its application with the Swiss regulator for a payments system license, opting instead to move its primary operations to the U.S., where Diem Networks U.S. sought to register as a money services business with the Financial Crimes Enforcement Network (FinCEN) and to run a blockchain-based payment system that allows the real-time transfer of U.S. dollar-backed stablecoins.

Before joining Menlo Park, California-based Facebook, Faizullabhoy and Eddequiouaq worked as a founding engineer and engineering lead, respectively, of the crypto platform Anchorage, which this year gained conditional approval from the Office of the Comptroller of the Currency (OCC) for a national trust banking charter.

"They’re really going to have an opportunity to impact the crypto ecosystem on a very broad scale," Albanese told CNBC.

As the financial industry faces new fintech competition, it isn't the first instance this year in which a pair of top executives exited a more established market player to join a startup-like effort. Omer Ismail, the former chief executive at Goldman Sachs’ consumer bank Marcus, and the unit’s ex-head of large partnerships, David Stark, left in February to join Walmart’s fintech.