At the Point Zero Forum in Zurich held on June 22, Sopnendu Mohanty, Chief Fintech Officer 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 the global crypto markets, and other panellists included Ripple CEO Brad Garlinghouse, Crypto.com CEO Kris Marzsalek, and state secretary at the state secretariat for International Finance in Switzerland Daniela Stoffel.
Beyond addressing the current bear market that’s causing havoc within the crypto world, the panellists discussed three other key things:
1. Cryptocurrencies need utility for the ecosystem to be healthy
Among other things, panellists were skeptical of the current model of many cryptocurrency tokens and the current cryptocurrency ecosystem. A common criticism among panellists was that many coins do not succeed, and the reason for that is that they do not bring utility to anyone holding the coins.
In particular, MAS’ Sopnendu criticised the current model of the crypto ecosystem, saying that many of the coins have taken up a life of their own, and that the market value of these coins have increased far beyond what is reasonable.
Garlinghouse was particularly critical of the status quo, and compared it to the XRP tokens that his own company creates.
The vast majority of tokens will go away over a period of time, because they have no utility. Dogecoin is a clear example of it. It was never designed with utility in mind, the founders have left the project, and the coin price moves based upon the tweets of Elon Musk. I don’t think that’s very healthy for the crypto market.
– Brad Garlinghouse, CEO of Ripple
As such, he encouraged entrepreneurs to focus less on speculation and more on utility. “If it’s just about speculation, it’s not sustainable in the long run”, he added.
That said, the panellists were very confident in the utility of cryptocurrencies in the modern day, especially in countries where fiat currencies and central banks fail to deal with the problems that real people face.
In response to a question on how to convince people of the utility of cryptocurrencies, Marzsalek suggested that cryptocurrencies might be valuable to people in such a situation.
You do not have to explain the inherent value of cryptocurrency to anybody in Turkey or anybody in Argentina. They feel the pain of a really high level of inflation, and they want to get access to a system that helps them preserve the value of their money and the adoption in this kind of emerging markets where these problems are everyday.
– Kris Marzsalek, CEO of Crypto.com
2. Crypto winter might be a force for good
Another key point that was discussed was the ongoing tumult in the cryptocurrency world. Cryptocurrency companies are laying off employees in a bid to cut costs, and many major cryptocurrency prices are falling.
On top of this, there has also been a string of high-profile crises within the cryptocurrency world, including that of Singapore-based Terraform Labs, Celsius, and Three Arrows Capital.
However, the panellists took the view that the crypto winter would actually be helpful to the overall health of the general crypto ecosystem.
For one, Kris argued that there was currently “a lot of fluff” in the crypto ecosystem, and that the recession in the crypto ecosystem would help to get rid of companies that were not on solid ground. Brad agreed with this, suggesting that companies that are focused on value will still manage to capture opportunities.
As such, regulators are also remaining open to the technology but also taking a critical look at companies.
The basic question that regulators are asking is ‘What is this coin?’ ‘What are the real utilities and use of this coin?’ ‘Do they have a real asset?’ We have debated on how the coins are supposed to generate economic activity with real cash flow associated with the coin. It seems to me that many coins are divorced 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 question of anonymity within the crypto space. Businesses, after all, have to fulfil Know-Your-Customer (KYC) obligations.
Given that 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 prominent concern for regulators.
Daniela Stoffel, state secretary at the state secretariat for International Finance, questioned how businesses like Crypto.com and Ripple were ensuring that their technology was not being used for illicit means.
In response, both CEOs argued that many in the cryptocurrency industry want to be good actors — they publish reports and do their due diligence even before they have to, because they feel it is 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 are leading the pack” when it comes to regulation, and that “most people in the crypto industry want to act with clarity within the rules.” However, the key challenge comes when these rules are not clear.
The US is not leading in terms of regulation. For years, Ripple has been asking for regulatory clarity from the US government. And then, the US took the step of saying that 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 to approach this. What we’ve 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 recession, it seems that some companies are more confident than others. While only time will tell which crypto companies are really here to stay, many would do well to heed the advice of the panellists if they hope to succeed: solve real world problems and work with regulators.
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