A visible illustration of Bitcoin cryptocurrency.
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Cryptocurrency corporations dominated the principle road on the World Economic Forum in Davos this yr, a notable distinction between this version and the final one in 2020.
The high-profile presence from the industry got here even because the cryptocurrency market crashed. It was sparked by the collapse of the so-called algorithmic stablecoin referred to as terraUSD or UST, which noticed its sister token luna drop to $0 in May.
Meanwhile, international regulators are setting their sights on the cryptocurrency industry.
WEF is the annual gathering of world enterprise leaders and politicians that goals to set the agenda for the yr.
Against that backdrop, it was the proper time to meet up with a few of the huge gamers within the cryptocurrency industry. Here’s what I realized.
Thousands of cryptos might collapse
There are presently over 19,000 cryptocurrencies and dozens of blockchain platforms in existence.
Blockchain is the expertise that underpins these digital currencies and platforms embrace Ethereum, Solana and plenty of others.
Many of the industry executives see the present state of the market as unsustainable.
Brad Garlinghouse, CEO of cross-border blockchain agency Ripple, predicted there could solely be “scores” of cryptocurrencies left sooner or later. He stated there are round 180 fiat currencies on this planet and there may be not likely a necessity for that many cryptocurrencies.
Betrand Perez, CEO of the Web3 Foundation, likened the present state of the market to the early web period, and stated there have been a number of “scams” and plenty of “were not bringing any value.”
Brett Harrison, CEO of cryptocurrency change FTX U.S., stated there are “a couple of clear winners” in the case of blockchain platforms.
You could have heard of stablecoins. They’re a kind of cryptocurrencies that are presupposed to be pegged to an actual world asset.
In follow, stablecoins like tether or USD Coin, which intention to reflect the U.S. greenback one-to-one, are backed by actual property corresponding to currencies or bonds. They maintain a reserve of those property as a way to preserve a greenback peg.
You could have additionally heard in regards to the debacle surrounding a terraUSD or UST. This is a so-called algorithmic stablecoin. Instead of sustaining its peg by having a reserve of property, it goals to imitate the U.S. greenback and preserve stability through a complex algorithm.
But that algorithm failed and caused terraUSD to lose its peg and collapse.
The crypto industry tried to warn users to make sure they know the difference between an algorithmic stablecoin, like terraUSD, and others that are backed by assets.
The terraUSD collapse “made it very clear to people that not all stablecoins are created equal,” said Jeremy Allaire, CEO of Circle, one of the companies behind the issuance of USDC.
“And it’s helping people differentiate between a well-regulated, fully reserved, asset-backed dollar digital currency, like USDC, and something like that (terraUSD).”
Reeve Collins, co-founder of BLOCKv and co-founder of another stablecoin tether, said the terraUSD saga will “probably be the end” of most algorithmic stablecoins.
Industry welcomes the bear market
Believe it or not, the cryptocurrency industry welcomed the recent market crash, which saw major tokens like bitcoin fall more than 50% from their all-time highs.
“We’re in a bear market. And I think that’s good. It’s good, because it’s going to clear the people who were there for the bad reasons,” said the Web3 Foundation’s Perez.
This sentiment was echoed by other executives too, who say the massive rally in prices caused people to focus on speculation rather than building products.
″[The] market, in my personal opinion, became maybe a little bit irrational, or maybe a little reckless to a certain extent. And when the times like that come, [a] correction is normally needed, and at the end of the day [is] healthy,” said Mihailo Bjelic, CEO of Polygon.
Regulation is coming but thinking has shifted
Ahead of the World Economic Forum, European Central Bank President Christine Lagarde said she thinks cryptocurrencies are “worth nothing.”
It appeared to me like regulators and authorities were still antagonistic to cryptocurrencies, much like they had been over the past few years at Davos.
But executives said the thinking from regulators, for the most part, has shifted to something slightly more constructive.
“I think we’ve come a long way from three or four years ago when when I literally had just arrived here in the snowy version of Davos and someone said, you know, crypto is still a bad word here. That is no longer the case. So I definitely don’t think ‘antagonism’ would be the right descriptor. I think ‘curiosity,'” Ripple’s Garlinghouse said.
“I think it’s constantly changing both regulators, big enterprises. Everyone wants to be more more involved with crypto now, no one is ignoring the industry anymore,” Polygon’s Bjelic said.
In March, U.S. President Joe Biden signed an executive order calling on the government to examine the risks and benefits of cryptocurrencies. Still, there is no major cryptocurrency regulation in the U.S. and other major economies.
Garlinghouse said that he wants “clarity and certainty” from regulators.
BLOCKv’s Collins, meanwhile, called Lagarde’s comments “ignorant.” He highlighted the tension that still exists between the cryptocurrency industry and some authorities in traditional finance.
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