Crypto is in the midst of a kicking renaissance. Continual declines in coin prices and failures like those of the TerraUSD stablecoin, hedge fund Three Arrows Capital, and lenders Voyager, BlockFi, and Celsius have repeatedly cast doubt on the optimistic vision of the crypto community.
However, the demise of poster child FTX has struck at the heart of the matter. Every revelation about the exchange’s laxity has fueled the suspicion that crypto is fundamentally flawed. Skeptics and those who are openly hostile are on the rise.
Questions are now being raised about whether crypto should be regulated as a form of finance. This would grant it a legitimacy that critics argue it lacks.
The strategy has been to stay as far away from Sam Bankman-Fried as possible. Others argue that the problem is centralized exchanges, and the crisis should hasten the transition to decentralized finance. Or that bitcoin is not the issue.
The Crypto World Is Facing a Crisis
The ECB blog, on the other hand, went for the jugular on bitcoin, concluding with a series of Crypto Critic best hits: bitcoin’s value is “based purely on speculation,” it is an “unprecedented polluter,” and it poses a “reputational risk for banks.”
Brian Armstrong, CEO of US-based Coinbase and, in my opinion, the likely successor to Sam Bankman-Fried as crypto’s chief advocate in Congress, responded with a laughing emoji.
Granted, no one expects the ECB to openly support efforts to create a private currency. Still, the industry needs to persuade its doubters more than ever rather than photoshopping a clown nose on Christine Lagarde’s face and responding with “have fun staying poor.”
The inside jokes may have worked when the prices rose, but the crypto world is facing an existential crisis. Playing to the crowd on social media isn’t going to cut it.
The industry must accept that it gave birth to Bankman-Fried. Fans of decentralized finance should investigate why it has been the source of so many hacks and how it will function without a centralized exchange to set prices or offer customers entry and exit points into the crypto world.