More cryptocurrency businesses will go bankrupt in a Ponzi scheme-like fashion, but it will also continue to be a key tool for international money exchange, according to a venture capitalist who recently had an interview with Fox News.
Fail in the Long Run
Investor and Palantir software co-founder Joe Lonsdale predicted that most cryptos would fail in the long run. He claims that the ecosystem as a whole, including different crypto lenders, tokens, and other components, was a "Ponzi scam."
According to Lonsdale, cryptocurrency ventures have been valued based on market demand rather than cash flows or adding value to the economy during the past few years.
Early in November, the Bahamas-based cryptocurrency exchange FTX declared bankruptcy under Chapter 11 after suffering losses of at least $1 billion.
BlockFi, a large crypto business, also declared bankruptcy last week, joining Celsius Network and Voyager Digital in entering Chapter 11 proceedings.
Lonsdale claimed that several businesses that have filed for bankruptcy had had a lot of corruption, although he only mentioned FTX.
"Long term, there's a good part of crypto, but most of what we saw in crypto the last three, four, five years was a speculative bubble driven by cheap money and driven by a lot of these Ponzi schemes," Lonsdale said in an interview with Fox News.
But amid the current crypto fiasco, Lonsdale said that the sector will still be able to develop technologies that would further advance the market.
Top Financial Regulator Calls for Legislation
A leading US financial regulator also appealed to Congress on Thursday to pass legislation establishing a legal framework for digital assets.
During the first of three congressional hearings to look into the collapse of FTX, members of the Senate Agriculture Committee questioned Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), on whether the turmoil could have been averted with greater accountability.
According to Behnam, the CFTC is constrained since it cannot register cash market transactions.
He warned lawmakers that if they do not take action fast, consumers will continue to lose money and face another FTX situation in a few months.
Benham said that the CFTC lacked the authority under the law to look into any of FTX's other companies and was ignorant of the operations of its subsidiaries.
Additionally, regulators are debating who should be in charge of regulating the crypto sector. Behnam and many senators on the Senate Agriculture Committee have already agreed that the CFTC needs to be more involved in the industry.
However, according to SEC Chair Gary Gensler, the US Securities and Exchange Commission is better suited to oversee markets that involve individual investors. He sees most cryptocurrency tokens as securities and expects his office to be the leading regulator.
Related Article : DOJ Requests Independent FTX Bankruptcy Probe, Reportedly to Acquire Fraud Evidence
