It’s already been a rough week for crypto. But this could all be the temporary discomfort of a revolutionary new industry that’s still maturing. Here’s what you need to do.
The crypto industry’s troubles continue to pile up. Amid government crackdowns, multimillion-dollar thefts, bankruptcies, and the decline of some of the world’s leading digital currencies, crypto has found itself in a moment of reckoning that seems to be growing more dire by the day.
In the first couple weeks of July, both Voyager Digital and Celsius Network filed for Chapter 11 bankruptcy. The customers of both companies could potentially financially suffer as a consequence. Later that month, it was revealed that the US government had launched investigations into Coinbase and Kraken for allegedly allowing US customers to sell unregistered securities as digital assets and for allegedly violating US sanctions law, respectively.
Crypto has been taking L after L lately. (Credit: Adobe Stock)
August has brought fresh wounds to crypto’s reputation.
On Monday, the US Securities and Exchange Commission (SEC) — which is also the agency leading the Coinbase probe — announced that 11 individuals had been charged for their connections to a “crypto pyramid and Ponzi scheme” called Forsage that raised a surplus of $300 min.
Also on Monday, hackers stole nearly $200mn from Nomad, a service which allows users to move crypto assets between blockchains. The company acknowledged in a tweet late yesterday that it was “aware of the incident involving the Nomad token bridge,” and followed up with a tweet this morning which said that the company is “working around the clock to address the situation and [has] notified law enforcement… Our goal is to identify the accounts involved and to trace and recover the funds.”
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It was then revealed this morning that the New York State Department of Financial Services — the state’s main financial regulation body — had slapped a $30mn fine on the crypto arm of Robinhood, an online financial services company. The NYDFS alleges that Robinhood Crypto LLC violated New York’s cybersecurity and anti-money-laundering rules.
Also from New York: that state’s Attorney General Leticia James also announced yesterday that her office wants to hear from “any New Yorker deceived or affected by the cryptocurrency crash,” according to a statement. James’ office “is interested in hearing from New York investors who have been locked out of their accounts, who are unable to access their investments, or who have been deceived about their cryptocurrency investments.”
Crypto might be down, but it’s not out
Despite all this negative news, we should always bear in mind: crypto is probably here to stay.
The market may be going through a valley at the moment, but that could also be interpreted as the growing pains of a transformative new technology that’s still trying to reconcile itself with the existing social, political and financial order.
It can be easy, amid all the recent sensationalist press, to believe that crypto is a failed experiment, an elaborate get-rich-quick scheme that’s now flaming out in a tremendous way. But the reality is of course a bit more complicated. The vast majority of crypto companies have not gone bankrupt, and most crypto investors have not lost fortunes. The tension between government officials and some crypto companies in the US is arguably an inevitable result of two powerful forces having a much-needed conversation about what the future is going to look like, and what the rules ought to be in order for the two to peacefully and productively coexist.
Crypto and Web3 not one and the same
It’s also important to clarify: crypto and Web3 are not the same.
The former’s reputation has been taking a beating lately, but that should not seriously impinge your views of the latter. Web3 should be thought of as an ecosystem of technologies, centering on the blockchain, of which crypto is but apart. The present crypto crisis certainly raises important questions about the safety of using decentralized blockchains as a means of sharing sensitive information, but it doesn’t necessarily mean that the so-called “metaverse,” NFTs or any other emergent technology that’s associated with Web3 is going anywhere anytime soon.
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