Crypto’s Resurgence: Molly White Highlights Ongoing Risks Amidst Industry Hype
In an insightful Bloomberg article, Molly White highlights the recent resurgence of the crypto market and cautions against the narrative of normalcy that comes with it. While Bitcoin prices soar, venture capital firms invest in crypto startups, and the infamous crypto bros mock skeptics, White argues that the underlying risks and issues remain unchanged.
White points out that despite the focus on regulatory compliance and endorsements from traditional financial institutions, the crypto market is still plagued by manipulation and scams. While the approval of spot Bitcoin exchange-traded products by the SEC is seen as a positive development, even SEC Chair Gary Gensler acknowledges Bitcoin’s speculative and volatile nature, with ties to illicit activities.
Market manipulation on crypto exchanges, particularly wash trading, continues to be a concern, with a small number of large holders artificially influencing prices. White argues that greater reforms and stricter enforcement are necessary to protect investors.
Another crucial point made by White is the heavy reliance of the crypto industry on storytelling, given the lack of practical applications of blockchain technology in everyday life. Over the years, narratives surrounding crypto have shifted, from presenting Bitcoin as a stable alternative to traditional banking to the buzz around “web3.” Now, the industry is embracing the AI trend, with startups promising to use blockchains alongside AI models, despite the inherent inefficiencies and limitations of blockchain systems.
White further emphasizes the concern surrounding AI pioneers being involved in blockchain projects, citing the example of OpenAI CEO Sam Altman’s Worldcoin token, which has faced criticism from data privacy agencies. She highlights that the AI-blockchain hybrid world is still speculative, similar to the worst offenders of the web3 era.
As the possibility of a new crypto mania looms, White argues that it is crucial to find new solutions to tackle the familiar downsides. Scammers should no longer exploit everyday people with promises of revolutionary technology. While some skeptics worry about regulatory loopholes and the potential legitimization of crypto, White believes that the past decade of regulatory neglect has not worked.
In conclusion, White calls for thoughtful and carefully crafted regulation to protect investors and mitigate the contagion of any future crypto disasters on the wider financial world. She also calls on industry leaders to hold each other accountable and support models of government regulation that prioritize rigorous external oversight.