At the latest Rosenblatt and Memery Crystal Breakfast Briefing, held in partnership with The Realization Group, digital and crypto industry specialists came together with guests representing the spectrum of industry practitioners to review the year from a Web3/digital technology perspective.
Rosenblatt Partner Laura Clatworthy and Memery Crystal Head of Financial Regulation, Daniel Tunkel were joined by industry experts Helen Disney (The Realization Group), Alex Batlin (Bitpanda Custody), Eva Lawrence (Figment) and Hirander Misra (GMEX).
Key takeaways:
- FTX and other ‘crypto crashes’ in 2022 are more about failings in ‘traditional’ asset/liability and risk management, governance and due diligence, and less the fact that they were ‘crypto’ businesses.
- Regulation doesn’t mitigate desire or ability of bad actors to do bad things. Those with an interest to defraud people or systems will always exploit new access channels, including ‘new’ crypto markets.
- FTX failure highlights need for greater segregation of activities e.g. market-making, custody, lending, hypothecation etc. Can’t have all eggs in single crypto entity baskets.
- Blockchain facilitates ‘hyper transparency’ in digital asset transaction lifecycles; public record of every transaction – and related action – on public record (nowhere to hide). This offers greater market stability even without regulation.
- There is a perception/reality gap between high level Government/regulator proclamations about the UK’s leadership in financial technologies and markets; and the reality of the ongoing fudging and stalling of regulatory approvals and market supervision. It was mooted:
- How well placed the regulator is to effectively oversee digital assets and digital businesses, without hiring people who are able to read code and decipher smart contracts?
- Can and should regulation (among other things) also be decentralised, to remove regulatory blocks and bring much needed efficiency, via baking in compliance into the issuance of tokens and other digital assets?
- Finally, data privacy and protection remain a key challenge, particularly with respect to smart (programmable) money. The decentralisation of personal data and how ownership is transferred to the individual is in our view Web3’s biggest challenge for next 5-10 years.
If you have been affected by the FTX collapse or if any of these issues affect you, please don’t hesitate to contact us. Our team of legal experts is here to help.
