Digital assets such as Bitcoin have seen a dramatic rise and fall, and now many are wondering about its future. Some simply don’t believe it has a future, while others feel the technology will change the way we live.
Jeremy Knopp’s focus has taken a sharp turn toward crypto.
“I’m more certain now than ever that this is going to be much bigger than most people anticipate,” he said.
He believes in the demand-led market value of crypto assets and maybe more so, the technology behind them.
But not everyone shares that belief. Some see crypto as a bubble waiting to burst.
What You Need To Know
- Even in Washington D.C., some believe crypto is a bubble waiting to burst
- Crypto is not insured the same way money is; when you deposit cash into a bank, it is insured – up to $250,00 with FDIC
- Crypto provided to exchanges such as FTX are not insured
- People also have major concerns with how crypto is mined, with computer systems using gigantic amounts of energy, and New York has instituted rules to ensure that doesn’t happen
“Plenty of people have made money from crypto. Plenty more people have lost money. That doesn’t mean that it has a public purpose,” Ohio Senator Sherrod Brown said.
Brown is one of many with concerns about crypto. They have seen the market value fluctuate. They see coins being lost to forgotten passcodes. What they don’t see is anything like FDIC to protect people in the same way it does with money in the bank.
If there is a disaster or fraud, cash in a bank is insured up to $250,000 per account. There are no such protections with crypto exchanges.
“They need to prove to us that there’s a public purpose. Otherwise, it will be regulated stringently and maybe, ultimately, it does go out of business,” Brown said.
The debate comes down to should the government regulate something designed to be decentralized, meaning the trust falls into math, rather than people? For a majority of the people involved, they all agree that, yes, some regulation is needed.
“I mean, to the extent that you’re not sure about this market because FTX happened and these other things have happened, you’re going to be less inclined to put your money into this market,” Cornell University law professor Charles Whitehead said about a lack of oversight causing a potential distrust in crypto.
Whitehead is not on a side. He just wants to see financial law work as it should, to protect.
“It’s not often easy to look inside of these companies,” Whitehead said of most all financial companies.
Companies like the one he mentioned, FTX, a crypto exchange that saw founder Sam Bankman-Fried, the face of crypto, arrested late last year on numerous fraud charges.
“These are all regulations that, had they been enforced and the regulators standing, acting for our benefit, and would have ensured, hopefully that these were being enforced. These are all things that would have minimize the likelihood of what happened in FTX,” Whitehead said of what Bankman-Fried is accused of.
There’s also some agreement on what part of crypto should be regulated. It’s not necessarily the decentralized tech, but more so the middlemen, the FTXs that handle others’ assets.
“You want to make sure that you can weed out bad actors and that you’re going to hold centralized entities to to some form of accountability,” Knopp said.
That’s where the debate truly sparks: How do you regulate?
“You got to go watch ‘Trading Places’ with Eddie Murphy. It’s a great movie, right?” Whitehead said with a smile. The movie actually breaks down, in a humorous way, two very important terms, securities and commodities.
“They talk about pork bellies and, I think, it was frozen orange juice. These are all commodities that may appreciate in value based upon general market conditions.”
How that relates here, is that crypto has yet to be officially designated. Is it a commodity? Many in the space would like to see that because it comes with less stringent regulation. Or, is it a security? That would, others say, require tougher regulations, but also more fair for regular finance.
“The whole point of FTX was to take your crypto and do stuff with it, invest it, loan it out, do stuff with it that would create value,” Whitehead added about how securities work.
That fact could swing crypto more toward a security. However, either way, an official classification is critical because it will change not only how the space will be regulated, but, in Knopp’s view, grow.
“You obviously want to facilitate a market that can grow on its own, that, you know, that fosters innovation, especially here in the U.S.,” he said.
That is how he believes crypto can become the next email, the next Amazon, the next Apple.
Another concern is the amount of energy it takes to mine crypto such as cryptocurrencies.
New York state recently banned operations that run on carbon-based power sources. Also, over the next two years, companies that mine on less than 100% renewable energy will not be allowed to expand or renew permits.
