Focus on the Cryptocurrency Industry: Regulation, Stables, Market Crash

A visual representation of the Bitcoin cryptocurrency.

Edward Smith | Getty Images

Cryptocurrency firms have dominated the main avenue of the World Economic Forum in Davos this year, a notable difference between this edition and the last in 2020.

To advertise

To advertise

The presence of a prominent industry is happening even now that the cryptocurrency market has crashed. It was triggered by the collapse of the so-called algorithmic stablecoin called terraUSD or UST, which saw its luna token drop to $0 in May.

Meanwhile, global regulators are keeping a close eye on the cryptocurrency industry.

The WEF is the annual meeting of global business leaders and politicians to set the agenda for the year.

In this context, it was the perfect time to catch up with some of the major players in the cryptocurrency industry. This is what I learned.

Thousands of cryptos could crash

There are currently over 19,000 cryptocurrencies and dozens of blockchain platforms.

Blockchain is the technology behind this digital currency and the platforms include Ethereum, Solana and many more.

Many market leaders confirm that the current market situation is untenable.

Brad Garlinghouse, CEO of the cross-border blockchain company Ripple, predicted that there may be only “dozens” of cryptocurrencies left in the future. He said there are about 180 fiat currencies in the world and it doesn’t really take that many cryptocurrencies.

Bertrand Perez, CEO of the Web3 Foundation, compared the current market situation to the dawn of the Internet age and said there were many “scams” and many that “provided no value”.

Brett Harrison, CEO of cryptocurrency exchange FTX US, said there are “a few clear winners” when it comes to blockchain platforms.

You may have heard of stablecoins. These are a type of cryptocurrencies that are meant to be linked to a real-world asset.

In practice, stablecoins such as tether or USD Coin, which enable the US dollar one-to-one, are backed by real assets such as currencies or bonds. They keep a reserve of these assets to maintain the peg to the dollar.

You may also have heard of the debacle limited to a terraUSD or UST. It is a so-called algorithmic stablecoin. Rather than maintain its peg by having a reserve of assets, it aims to mimic the US dollar and maintain stability through a complex algorithm.

But this algorithm failed and caused terraUSD to lose its pin and collapse.

The crypto industry has tried to warn users to make sure they know the difference between an algorithmic stablecoin, such as terraUSD, and others backed by assets.

Everyone now wants to be more involved in crypto, no one ignores the industry anymore.

Mihailo Bjelic

CEO of Polygon

The collapse of terraUSD “made it very clear to people that not all stablecoins are created equal,” said Jeremy Allaire, CEO of Circle, one of the companies behind the USDC issuance.

“And it helps people differentiate between a well-regulated, fully booked, asset-backed digital dollar currency, like USDC, and something like this (terraUSD).”

Reeve Collins, co-founder of BLOCKv and co-founder of another stablecoin, said the terraUSD saga will “probably be the end” of most algorithmic stablecoins.

Industry welcomes bear market

This sentiment was also shared by other leaders, who: terrible the massive rise in prices has led people to focus on speculation rather than building commodities.

I[The] market, in my personal opinion, has perhaps become a bit irrational, or perhaps a bit reckless to some extent. And when times like these come, [a] correction is normally necessary, and at the end of the day [is] healthy”, says Mihailo Bjelic, CEO of Polygon//descriptor please ///.

Regulation is coming, but thinking has changed

Ahead of the World Economic Forum, European Central Bank president Christine Lagarde said that cryptocurrencies are worth “worth nothing”.

It seemed to me that regulators and authorities were still hostile to cryptocurrencies, just as they had been in Davos for the past few years.

But executives said for the most part, regulators’ thinking had shifted to something more constructive.

“I think we’ve come a long way in the last three or four years when I literally came here in the snowy version of Davos and someone said, you know, crypto is still a bad word here. It’s no longer the me, so I certainly don’t think ‘antagonism’ is the right description, I think ‘curiosity,’ said Ripple’s Garlinghouse.

“I think it’s constantly changing the two regulators, the big companies. Everyone wants to be more involved in crypto now, nobody ignores the industry anymore,” said Polygon’s Bjelic.

In March, US President Joe Biden signed an executive order calling on the government to investigate the risks and benefits of cryptocurrencies. Still, there are no major cryptocurrency regulations in the United States and other major economies.

Garlinghouse said he wanted “clarity and certainty” from regulators.

BLOCKv’s Collins, meanwhile, called Lagarde’s comments “ignorant.” He highlighted the tension that still exists between the cryptocurrency industry and some traditional financial authorities.

Follow CNBC International on Twitter and facebook

Leave a Comment