By Ron Hamenahem, Co-Founder and Chief Operating Officer of Koinos Group
In the immediate wake of the implosion of the FTX exchange, U.S. Senator Elizabeth Warren tweeted, “The collapse of one of the largest crypto platforms shows how much of the industry appears to be smoke and mirrors. We need more aggressive enforcement and I'm going to keep pushing @SECGov to enforce the law to protect consumers and financial stability.”
Brian Armstrong, Coinbase CEO, responded that FTX was not regulated by the SEC because it was an offshore exchange. He said, “The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore. Punishing US companies for this makes no sense.”
Armstrong’s point is well made, and many major industry insiders agree: Warren, and others like her, regularly complain about and threaten the crypto markets, and then do nothing to regulate it, much less help it. That regulatory uncertainty then drives American businesses offshore, not necessarily for some arcane tax advantage, but so they don’t accidentally infringe on hazy, ambiguous regulations at home. Current legislation frightens crypto businesses out of the U.S., stripping them of protection, and then attacks them for being unprotected. We’ve seen this before: it’s an exact replica of the early days of the stock markets.
We don’t yet know exactly what happened inside FTX. Perhaps we never will. But it’s been a rocky year for crypto, and we’ve begun to learn from the lessons of history: In a bear market, a cheater always gets exposed. It happens every time. So, how can we stop it from happening again?
The recent upheavals are a distraction
Cryptocurrencies will be mainstream. There will be real-world take-up. It’s inevitable. In fact, the change has already happened in many important ways, and short of a solar flare wiping out the Earth’s magnetosphere, there’s no rolling it back.
The collapse of FTX, or LUNA, or dozens of others before these, are distractions. A speedbump. It’s natural selection – the market kneading out the knots and selecting out the bad actors. In the long term, we’ll look back on these upheavals and see them for what they are: necessary.
No one, including myself, is actively hoping for a total crash of the crypto markets. But that’s what it took to force in some clear regulation in the early days of the stock market after the crash of 1929, and that regulation has kept the global economy relatively stable ever since. Hopefully we won’t have to reach that point before regulators decide to take action.
In order to shape the future, we have to be able to focus on it. That means reminding ourselves every now and then of the importance of decentralization, the social benefits of blockchain technology, and the unlimited potential of what we’re fighting for. A level playing field that’s free to use, easily accessible, and infinitely upgradable. Everything else is a distraction.
The importance of personal responsibility
Right now, everyone’s excited, and everyone’s angry. I said we don’t know what happened at FTX, and that’s true. But we know what caused it. When the dust has settled, the same answer always emerges. It was greed. And ego.
I’ve made bad investments in crypto in the past and lost. I blamed myself for ignoring the red flags and focusing only on the possible rewards. It was a bitter pill to swallow, but I learned from my mistakes and moved on.
What I learned from those experiences is that, I believe, at least 50% of the key to the futurity of cryptocurrency in the real world consists of personal responsibility. This is a high-risk market, and we all need to take responsibility for our actions.
Naturally, my sympathy is always with the victims of a scam and, ultimately, theft is always the fault of the thief.
But we also need to acknowledge that if we’re not doing the necessary homework on our investments, if we’re not doing our own research, then we’re basically just rolling the dice. And even then, the potential high returns can cause us to ignore red flags. With some education, some thinking that extends beyond the desire to get rich immediately, and by demanding clearer regulation and protection, a decentralized future is within reach.
This is absolutely positively the most exciting time we could possibly hope to be alive. Don’t take that for granted.
About Ron
Ron Hamenahem, Co-Founder and Chief Operating Officer of Koinos Group, an early adopter of crypto and an entrepreneur with 13 years of design and information technology experience. He previously worked as the Head of Design at OpenOrchard.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
