The state of the cryptocurrency markets and its regulations

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

The panel discussion focused on the topic of the current and future state of global crypto markets, and other speakers included Ripple CEO Brad Garlinghouse, Crypto.com CEO Kris Marzsalek, and Secretary of State at the Secretariat of State for international finance in Switzerland Daniela Stoffel.

In addition to addressing the current bear market that is wreaking havoc in the cryptocurrency world, the speakers discussed three other key things:

1. Cryptocurrencies need utilities for the ecosystem to be healthy

Among other things, the speakers were skeptical of the current pattern of many cryptocurrency tokens and the current cryptocurrency ecosystem. A common criticism among speakers was that many coins are unsuccessful, and the reason is that they are of no use to anyone who holds the coins.

In particular, MAS’s Sopnendu criticized the current crypto ecosystem model, stating that many of the coins have taken on a life of their own and that the market value of these coins has risen far beyond reasonable.

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

Garlinghouse was particularly critical of the status quo and compared it to the XRP tokens created by his own company.

The vast majority of tokens will go away over a period of time, because they have no use. Dogecoin is a clear example of this. It was never designed with utility in mind, the founders left the project, and the price of the coins moves according to Elon Musk’s tweets. I don’t think it’s very healthy for the cryptocurrency market.

– Brad Garlinghouse, CEO of Ripple

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

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That said, panel members were very confident in the usefulness of cryptocurrencies in the present day, especially in countries where fiat currencies and central banks fail to address the problems real people face.

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

You don’t have to explain the intrinsic value of cryptocurrency to anyone in Turkey or Argentina. They feel the pain of a really high level of inflation and want to have access to a system that helps them preserve the value of their money and adoption in this type of emerging market where these problems are daily.

– Kris Marzsalek, CEO of Crypto.com

2. The crypto winter could be a positive force

Another key point that was discussed was the ongoing turmoil in the world of cryptocurrencies. Cryptocurrency companies are firing employees in an effort to cut costs, and many of the major cryptocurrency prices are falling.

In addition, there has also been a number of high-profile crises in the cryptocurrency world, including that of Singapore-based Terraform Labs, Celsius and Three Arrows Capital.

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Roundtable at the Point Zero Forum / Image Credit: Screenshot by Vulcan Post

However, panel members felt that the crypto winter would actually be beneficial for the overall health of the overall crypto ecosystem.

For one, Kris said that there is currently “a lot of fluff” in the crypto ecosystem and that recession in the crypto ecosystem would help get rid of companies that weren’t on a solid footing. Brad agrees with this, suggesting that value-focused companies will still be able to seize opportunities.

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

The fundamental question that regulators ask themselves is “What is this currency?” “What are the real uses and uses of this currency?” “Do they have a real asset?” We discussed how coins should generate economic activity with real cash flow associated with the coin. It seems to me that many coins are separate from utility.

– Kris Marzsalek, CEO of Crypto.com

3. Clear regulation is good regulation

Another issue that has recently become a point of concern for the crypto ecosystem is the issue of anonymity within the crypto space. Businesses, after all, must meet Know-Your-Customer (KYC) obligations.

As 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, Undersecretary of State at the Secretariat of State for International Finance
Daniela Stoffel, Secretary of State at the Secretariat of State for International Finance / Image credit: Screenshot by Vulcan Post

Daniela Stoffel, secretary of state at the Secretariat of State for International Finance, questioned how companies like Crypto.com and Ripple were ensuring their technology was not being used by illicit means.

In response, both CEOs said that many in the cryptocurrency industry want to be good players – they publish reports and do their due diligence even earlier than necessary, because they believe it’s the right thing to do.

At the same time, they also welcome regulation because it provides clarity for businesses.

Brad commented that “Singapore and Switzerland lead the pack” when it comes to regulation and that “most people in the cryptocurrency industry want to act clearly within the rules.” However, the key challenge comes when these rules are unclear.

The United States is not a leader in terms of regulation. For years, Ripple has been demanding regulatory clarity from the US government. And then, the United States took the step by saying that the Securities and Exchange Commission has filed a lawsuit saying we consider XRP as a stock.

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

– Brad Garlinghouse, CEO of Ripple

As cryptocurrency companies brace for recession, it appears some companies are safer than others. While only time will tell which cryptocurrency companies are really here to stay, many would do well to follow the advice of panel members if they hope to succeed: solving real-world problems and working with regulators.

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Featured image credit: Vulcan Post screenshot

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