It’s already been a rough week for crypto. But all this could be the temporary discomfort of a revolutionary new industry that is still maturing. Here’s what you need to do.
The problems of the crypto industry continue to pile up. In the midst of government crackdowns, multi-million dollar thefts, bankruptcies and the decline of some of the world’s leading digital currencies, crypto has found itself in a moment of reckoning that seems to be getting tougher by the day.
In the first few weeks of July, both Voyager Digital and Celsius Network filed for Chapter 11 bankruptcy. Customers of both companies could potentially suffer financially as a result. Later that month, it was revealed that the US government had launched investigations into Coinbase and Kraken for allegedly allowing US clients to sell unregistered securities as digital assets and for allegedly violating US sanctions law.
Crypto has been taking L for L lately. (Credit: Adobe Stock)
August brought new wounds to the cryptocurrency’s reputation.
On Monday, the U.S. Securities and Exchange Commission (SEC) — which is also the agency investigating Coinbase — announced that 11 individuals were indicted for their ties to a “crypto pyramid and Ponzi scheme” called Forsage that collected an excess of $300 plural
Also on Monday, hackers stole nearly $200 million from Nomad, a service that allows users to move crypto assets between blockchains. The company acknowledged in a tweet late yesterday that it was “aware of the incident involving the Nomad token bridge,” and tweeted this morning that the company was “working around the clock to resolve the situation and [has] informed the police… Our aim is to identify the accounts involved and to trace and recover the funds.”
The latest marketing news and insights straight to your inbox.
Get the best of The Drum by choosing from a range of excellent email briefings, whether it’s daily news, weekly summaries or in-depth explorations of media or creativity.
Then this morning, it was revealed that the New York State Department of Financial Services — the state’s main financial regulatory body — fined the crypto arm of Robinhood, an online financial services company, $30 million. The NYDFS alleges that Robinhood Crypto LLC violated New York’s cybersecurity and anti-money laundering rules.
Also from New York: Attorney General Leticia James also announced yesterday that her office wants to hear from “any New Yorker who has been defrauded or affected by the cryptocurrency crash,” according to a statement. James’ office is “interested in hearing from New York investors who have had their accounts blocked, are unable to access their investments, or have been defrauded about their cryptocurrency investments.”
Crypto may be down, but it’s not out
Despite all this negative news, we should always remember: crypto is probably here to stay.
The market may be going through a valley right now, but it can also be interpreted as the growing pains of a transformative new technology that is still trying to come to terms with the existing social, political and financial order.
It can be easy, in the midst of all the recent sensationalist press, to believe that crypto is a failed experiment, an elaborate get-rich-quick scheme that has now exploded in spectacular fashion. But the reality is of course a bit more complicated. The vast majority of crypto companies have not gone bankrupt, and most crypto investors have not lost their fortunes. The tension between government officials and some crypto companies in the US is probably the inevitable result of a much-needed conversation between the two powerhouses about what the future will look like and what the rules should be for the two to coexist peacefully and productively.
Crypto and Web3 are not one and the same
It is also important to clarify: crypto and Web3 are not synonymous.
The former’s reputation has been tarnished lately, but that shouldn’t seriously affect your opinion of the latter. Web3 should be seen as an ecosystem of technologies, centered on the blockchain, of which crypto is only a part. The current crypto crisis certainly raises important questions about the security of using decentralized blockchains as a means of sharing sensitive information, but that doesn’t necessarily mean that the so-called “metaverse,” NFT, or any other emerging technology is Web3-related. go anywhere anytime soon.
For more, sign up for The Drum’s Inside the Metaverse weekly newsletter here.