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Cryptocurrency won’t go mainstream until the US fixes its problems, says Chainalysis CEO
Cryptocurrency may not become a fully mainstream financial instrument until they are effectively regulated the highly volatile sector they are developed and enforced by authorities in the United States, said the CEO of blockchain company Chainalysis.
While acknowledging that current cryptocurrency systems are “actually quite good and functional,” the $2.33 trillion industry other issues need to be addressedespecially when it comes to protecting investors and consumers, said Michael Gronager The national team.
The United States, the largest economy in the world, is also considered the most important financial market the Federal Reserve sets the global tone for interest rates – should take the lead, he said.
“In finance, everyone looks at the United States first trying to understand what’s going on, and then if the regulation has already been created in other places … it will be changed to fit the U.S. framework once it’s understood,” Mr. Gronager said.
“We’ve seen this in the past; we will see this again with cryptocurrencies. So, we’re waiting for the United States to resolve some of these things and that’s how things are today.”
In January, the United States handed the cryptocurrency industry a major victory has finally approved the country’s first spot Bitcoin ETFspioneering trading on the New York Stock Exchange, Cboe Global Markets and Nasdaq Composite and making Bitcoin more accessible to retail traders.
ETFs “have definitely boosted cryptocurrency sentiment,” Gronager said.
Furthermore, US authorities have been vigilant in cracking down on the sector, chasing irregularities and illicit activity within it.
Their actions have claimed some of the biggest names, including Sam Bankman-Fried, the former CEO of FTX sentenced to 25 years in prison for fraudand former Binance CEO Changpeng Zhao, who he pleaded guilty to the charges in November related to money laundering and on April 30 he was sentenced to four months in prison.
“The FTX case was very unique; it was less related to cryptocurrencies and more related to a traditional fall because everything happened behind closed doors and was related to the way the company was run by the people behind it,” Gronager said.
“The lesson learned by industry and regulators is that if this is an unregulated business in your jurisdiction and you have no way of thinking your funds would be good, they probably aren’t,” he added. noting the collapse of Three Arrows and Celsius Network in 2022.
The fate of those companies, combined with job losses at the time, triggered the so-called cryptocurrency winter, a period in which the sector cooled, dragging Bitcoin below its key psychological level of $20,000 in June 2022 and wiping out about $2 trillion from the economy. the market capitalization of the digital asset sector.
“Celsius and Three Arrows were symptoms of a financial market that was too hot. And the new entrants into finance have been cryptocurrency exchanges and some cryptocurrency projects – they have definitely been the ones that have completely overleveraged,” Gronager said.
“And some of them did it illegally. And that’s basically what we saw there. We have also seen established venture capital firms overleverage their investments and get into big trouble, but most of them have actually survived.
For the financial sector in general, Gronager believes there is a “robust and good enough framework” to counter money laundering and terrorist financing.
Applied to the cryptocurrency industry, the $4.3 billion settlement between Binance and the US Department of Justice last November is an indication that the authorities have taken a stand and it is being taken very seriously.
“We had all the big banks…each with billion-dollar fines; now you’re seeing the same in the crypto space and this raises the bar, ensures that compliance will have the highest priority and good understanding and accountability of the industry,” Gronager said.
Major fines imposed on financial institutions for non-compliance include JP Morgan Chase’s $2.6 billion settlement following Bernard Madoff’s Ponzi scheme in 2014 and the $5.28 billion payment by by Credit Suisse in 2017 for misconduct in the sale of residential mortgage-backed securities.
“Now there is a price to pay if you fail to comply or make mistakes.”
Regulations are key to establishing trust in the cryptocurrency industry and governments should play an active role in ensuring this, Gronager said, Who’s counting the United Arab Emirates as among “the top three or five in terms of the global landscape” also in the field of finance and cryptocurrencies.
He said the Emirates had “a good way to work with [crypto] industry, ensuring there is adequate regulation,” on par with other global financial centers such as New York, London and Singapore.
The total value of cryptocurrency transactions in the UAE from the first quarter of 2023 to the first quarter of 2024 reached $39.2 billion, according to data provided by Chainalysis to The national team Shows.
Institutional investors, those investing more than $1 million, made up the largest share of transactions in the UAE at 59%, while professional investors (from $10,000 to $1 million) were at 39% and investors retail (up to $10,000) were at 2% percent, the data shows.
“The UAE, in general, is very advanced and sophisticated [cryptocurrency] use cases and is probably one of the few markets where decentralized finance is more relevant than centralized exchanges, demonstrating that the level of sophistication is quite high,” Gronager said.
Updated: May 16, 2024, 3:00 am