Crypto

The state of crypto markets and their regulations

At the Point Zero Forum in Zurich on June 22, Sopnendu Mohanty, Director of Fintech at the Monetary Authority of Singapore, was invited to speak as part of a panel discussion.

The panel discussion focused on the topic of the current and future state of global crypto markets, with other panelists including Ripple CEO Brad Garlinghouse, Crypto.com CEO Kris Marzsalek, and Secretary of State for International Finance at Switzerland, Daniela Stoffel.

Beyond addressing the current bear market that is wreaking havoc in the crypto world, the panelists discussed three other key things:

1. Cryptocurrencies need utility for a healthy ecosystem

Among other things, the panelists were skeptical about the current model of many cryptocurrency tokens and the current cryptocurrency ecosystem. A common criticism among the panelists was that many coins are not successful, and the reason for this is that they do not bring utility to anyone who owns them.

In particular, Sopnendu of MAS criticized the current model of the crypto ecosystem, saying that many of the coins have taken on a life of their own and that the market value of these coins has increased much more than is reasonable.

sopnendu mohanty plus ripple brad garlinghouse
Sopnendu Mohanty, CFO of MAS (left) and Brad Garlinghouse, CEO of Ripple (right) / Image Credit: Vulcan Post Screenshot

Garlinghouse was particularly critical of the status quo, comparing it to XRP tokens that his own company creates.

The vast majority of tokens will disappear over time, because they are useless. Dogecoin is a clear example of this. It was never designed with utility in mind, the founders abandoned the project, and the price of the coin moves based on Elon Musk’s tweets. I don’t think that’s very healthy for the crypto market.

– Brad Garlinghouse, CEO of Ripple

As such, he encouraged businessmen to focus less on speculation and more on profit. “If it’s just speculation, it’s not sustainable in the long run,” he added.

That said, the panelists were very confident in the usefulness of cryptocurrencies today, especially in countries where fiat currencies and central banks are failing to address the issues facing real people.

In response to a question about how to convince people of the usefulness of cryptocurrencies, Marzsalek suggested that cryptocurrencies could be of value to people in such a situation.

You do not have to explain the inherent value of cryptocurrency to anyone in Turkey or anyone in Argentina. They feel the pain of really high inflation and they want access to a system that helps preserve their money’s worth and adoption in these kinds of emerging markets where these issues are everyday.

– Kris Marzsalek, CEO of Crypto.com

2. Crypto Winter could be a force for good

Another key point that was discussed was the ongoing turmoil in the world of cryptocurrencies. Crypto companies are laying off employees in a bid to cut costs, and many major crypto prices are falling.

In addition to this, there have also been a number of high-profile crises within the world of cryptocurrencies, including that of Terraform Labs, Celsius, and Singapore-based Three Arrows Capital.

zero point forum
Panel discussion at Point Zero Forum / Image Credit: Screenshot from Vulcan Post

However, the panelists were of the opinion that the crypto winter would actually be helpful for the overall health of the overall crypto ecosystem.

On the one hand, Kris argued that there was currently “a lot of fluff” in the crypto ecosystem and that the downturn in the crypto ecosystem would help weed out companies that were not on solid footing. Brad agreed with this and suggested that companies that focus on value will still be able to capture opportunities.

As such, regulators also remain open to the technology, but also take a critical look at companies.

The basic question regulators ask is ‘What is this currency?’ ‘What are the true utilities and use of this currency?’ ‘Do they have a real asset?’ We have discussed how currencies are supposed to generate economic activity with real cash flow associated with the currency. It seems to me that many currencies are divorced from utility.

– Kris Marzsalek, CEO of Crypto.com

3. Clear regulation is good regulation

Another topic that has recently become a point of concern for the crypto ecosystem is the issue of anonymity within the crypto space. Companies, after all, have to comply with Know-Your-Customer (KYC) obligations.

Since we live in a world of sanctions, where many different restrictions are in place to prevent funds from reaching certain countries or groups, this has become a major concern for regulators.

Daniela Stoffel, Secretary of State at the Secretary of State for International Finance
Daniela Stoffel, secretary of state at the Secretary of State for International Finance / Image Credit: Vulcan Post Screenshot

Daniela Stoffel, secretary of state at the Secretary of State for International Finance, questioned how companies like Crypto.com and Ripple ensure that their technology is not used for illicit purposes.

In response, both CEOs argued that many in the cryptocurrency industry want to be good players: They publish reports and do their due diligence before they even have to, because they feel it’s the right thing to do.

At the same time, they also welcome regulation because it brings clarity to businesses.

Brad commented that “Singapore and Switzerland are leading the way” when it comes to regulation, and that “most people in the crypto industry want to play it clear within the rules.” However, the key challenge arises when these rules are not clear.

The United States is not in the lead in terms of regulation. For years, Ripple has been asking the US government for regulatory clarity and then the US took the step of saying the Securities and Exchange Commission filed a lawsuit saying that we view XRP as a security.

Regulation through enforcement is a very, very ineffective way of tackling this. What we have seen in Switzerland and in Singapore is a much more constructive partnership with the private sector, and I think that is a model for many other countries.

– Brad Garlinghouse, CEO of Ripple

As crypto companies brace for a downturn, it appears that some companies are more confident than others. While only time will tell which crypto companies are truly here to stay, many would do well to heed the panelists’ advice if they hope to succeed: solve real-world problems and work with regulators.

Featured Image Credit: Vulcan Post Screenshot

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