The immense fraud and failure throughout crypto in 2022 have regulators hastily and recklessly driving the industry offshore, according to Custodia Bank CEO Caitlin Long.
The executive sat down with private investor and ShapeShift CEO Erik Voorhees at Consensus 2023 to discuss the many ways in which crypto has lost its way, and how it can still help remedy the problems that centralized mismanagement has caused.
Is Crypto Straying From Its Purpose?
During a Thursday Panel titled, “Remember Why We’re Here: Crypto’s True Purpose”, Voorhees and Long both said they were first driven into crypto after being disenchanted by the great financial crisis and learning the failures of the current monetary system.
In particular, Long realized that the current financial system doesn’t run on an “honest ledger”.
“If we have an honest ledger then the fruits of our labor can be saved in a way that someone else is not stealing it,” she explained. Bitcoin, for her, represented a ledger that could be trusted and which had “no counterparty risk.”
The panelists reflected on FTX’s collapse in 2022 as a prime example of the very centralized fraud that Bitcoin was supposed to provide safety from. Long said that the recent crackdowns against crypto companies by regulators are an overreaction to that, with the companies attempting to be the most compliant getting punished the hardest.
“I lament that the United States is throwing out the entire reasonable regulation approach out with the bathwater, because they’re literally shoving everything offshore and into the unregulated shadow markets, and rejecting those trying to create a reasonable regulatory regime.”
Long added that the Securities and Exchange Commission’s “wack-a-mole” approach to regulating will only allow people to continue getting scammed.
“It seems that they are deliberately saying ‘stay the fuck away’… by those of us who did approach them for permission,” she said.
Long’s Custodia Bank, designed to be a compliant bridge between crypto and US dollar payments – sued the Federal Reserve in June 2022 for improperly handling its decision to grant the company a master account with the central bank.
Open Source is the Answer
Voorhees believes there’s a solution to future scammers – but it doesn’t need to involve more regulation. “Open source software is the solution to scams perpetrated by people,” he said, arguing that the naturally transparent approach of Bitcoin is simpler and more effective than transparency enforced by the government.
“I wish some of these regulators would say thank you to these incredible, talented engineers around the world who are actually building transparent, immutable financial software,” he said.
The libertarian-minded crypto fan, while against scammers, doesn’t necessarily object to the speculative bubbles in which they emerge. FTX, for instance, while having blown up, is now a thing of the past.
“Not that I’m happy that people lost money on failed projects, but it also created things like Ethereum itself,” he said, referring to the 2017 ICO bubble. “The return on capital on just Ethereum pays off all ICO investment 10x – easily.”