Why Aussie crypto stars are convinced Larry Fink is wrong
Last week, Jonathan Levin, co-founder of the world’s most important crypto and blockchain analysis firm Chainalysis, said Australian investors should look to native exchanges, such as Independent Reserve, to cut the risk of losing everything in a future crash.
Mr Przelozny, however, said the local sector, and investors, needed speedy government action on creating clear regulations, to build community trust. Creditors at the recent FTX Australia bankruptcy proceedings, found that even with an Australian Financial Services Licence (AFSL), their digital assets were not protected by existing laws.
Bryce Doherty and Richard Galvin said that, while FTX was a disaster for those who lost money, the crypto asset class is not dead. Rhett Wyman
“The investment case for crypto is kind of the same as before, especially for the likes of bitcoin and ethereum … (other tokens and assets) have all got their own niche use cases, and they all need to be examined individually, but a lot of those things won’t survive the bear market,” he said.
“It’s understandable that the Labor government didn’t make crypto regulation a priority, but given what’s happened with FTX, it’s becoming harder and harder for governments to ignore … We’ve been asking for this for a long time.”
Richard Galvin and Bryce Doherty, the leaders of the Australian arm of global crypto-specialist investment manager Digital Asset Capital Management (DACM), said they saw the FTX fallout as damaging, but non-fatal for the industry.
Mr Galvin, a former JPMorgan banker, said the pair had initially shifted into crypto investing because of the disruptive potential of the technology, which had not changed because of the collapse of an exchange.
He said DACM continued to meet with entrepreneurs who were experimenting and inventing a growing number of new use cases, and that he was confident optimism would return after a “rough year”.
“Since we launched DACM in 2017, crypto has been declared dead on four or five occasions. The FTX collapse is terrible for those caught up in it, we don’t discount that, and it’s clearly a headwind on the overall markets in which crypto are traded, but crypto, the technology and the asset class, is not dead,” Mr Galvin said.
“If the NASDAQ exchange collapsed today, no-one would claim Google is finished, and FTX has no closer relationship to crypto than this example.”
Mr Doherty added that DACM had been in the UK and continental Europe as the FTX collapse was unfolding, meeting with potential investors, and that the events had caused some chief investment officers and investment committees to hit pause on capital deployments. However, he said they all agreed this was a temporary halt.
Dotcom bust parallels
The boss of the Australian arm of international crypto exchange Coinbase. John O’Loghlen meanwhile compared the current situation in the crypto sector to the dotcom bust at the turn of the century.
He said companies with good new ideas were wiped out in the dotcom crash because they were too early, only for their ideas to re-emerge later, and said this would be true of many current crypto firms.
“Technological breakthroughs might take a lot longer than people realise … Crypto is going through a similar journey to the dotcom bubble, where there were a lot of frauds too,” Mr O’Loghlen said,
“What will happen now is people will become more disciplined in their investments. They will educate themselves a lot more about compliance, about tax, about governance. That discipline is something that will come from this whole event.
“The industry itself is carrying on. There are events all over the country full of developers and artists using this technology to build businesses. And that’s not really going to stop.”
Natasha Blycha, managing director of crypto law firm Stirling & Rose, described FTX’s crash as a “well-needed reckoning,” where people were punished for taking escalating risks, and investing in products they did not understand.
She said the technology underpinning crypto was capable of solving various problems, but that the decentralisation ushered in, had enabled dishonest operators to thrive, due to a lack of regulations.
“If FTX Australia had had a market licence none of this would have happened. The rules were built for this exact type of behaviour. This reckoning is useful because it’s going to force people to do things properly if they want to survive,” Ms Blycha said.