According to a venture capitalist who recently spoke with Fox News, more cryptocurrency businesses will fail in a Ponzi scheme-like manner, but they will also continue to be a crucial instrument for international money exchange.
Fail in the Long Run
Joe Lonsdale, a co-founder of Palantir and an investor, predicted that the majority of cryptocurrencies would eventually fail. The ecosystem as a whole, encompassing various crypto loans, tokens, and other elements, was, according to him, a Ponzi scheme.
Lonsdale asserts that over the past few years, cryptocurrency ventures have been valued more on the basis of market demand than on their ability to generate cash flow or contribute to the economy.
The Bahamas-based cryptocurrency exchange FTX filed for Chapter 11 bankruptcy at the beginning of November after sustaining losses of at least $1 billion.
Large cryptocurrency company BlockFi also filed for bankruptcy last week, joining Celsius Network and Voyager Digital in doing so.
Although he solely named FTX, Lonsdale asserted that several companies that had filed for bankruptcy had experienced significant misconduct.
In a Fox News interview, Lonsdale stated, “Long term, there’s a good part of crypto, but most of what we saw in crypto the last three, four, and five years was a speculative bubble driven by cheap money and driven by a lot of these Ponzi schemes.”
Lonsdale asserted that the industry will still be able to create innovations that will improve the business despite the current crypto crisis.
Top Financial Regulator Calls for Legislation
On Thursday, a top US financial regulator also urged Congress to enact legislation creating a regulatory framework for digital assets.
Members of the Senate Agriculture Committee questioned Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), regarding whether the upheaval could have been avoided with greater accountability during the first of three congressional hearings to look into the collapse of FTX.
Behnam claims that the CFTC is restricted because it is unable to record cash market transactions.
He warned lawmakers that if they do not act quickly, consumers will continue to lose money and in a few months will be faced with another FTX situation.
Benham said that the CFTC lacked the legal power and had no knowledge of the operations of any of FTX’s other firms.
Regulators are also discussing who should be in charge of regulating the cryptocurrency industry. The CFTC needs to be more involved in the sector, according to Behnam and numerous senators on the Senate Agriculture Committee.
Gary Gensler, the chairman of the Securities and Exchange Commission, asserts that the US Securities and Exchange Commission is more qualified to regulate markets that involve individual investors. He believes that the majority of cryptocurrencies are securities and that his office will be the main regulator.
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