Shocking Revelation: Cryptofinance Development Canceled and the Reason Will Leave You Speechless | You Won’t Believe What Happened Next!

Hello and welcome to the latest edition of the FT Cryptofinance newsletter. This week, we’re looking at what happens when the show goes on.

I spent time this week in Amsterdam at the FT’s annual The Next Web conference, an event that sits at the intersection of technology and finance.

The last 12 months have been an unprecedented time of crisis for digital tokens, so I expected crypto representatives to be pretty quiet compared to last year, when Sam Bankman-Fried (remember him?) called to preach the promise of cryptocurrencies.

But the depth of pessimism among finance professionals, tech start-ups, and C-suite executives surprised even this journalist with his fair share of cryptocurrency conferences to his credit.

Most attendees told me that the time of cryptocurrencies has passed, giving its momentum to artificial intelligence or simply not recovering from last year’s crash.

The prospect was reassuring. In a panel on central bank digital currencies, Stephen Boyle, head of strategic alignment at Lloyds Banking Group’s chief technology office, told me that cryptocurrencies have good ideas but that they should reside in more suitable institutions, such as a bank. central.

“I think what may be lagging behind is the idea of ​​digital money. . . but in a much more regulated environment than what we’ve seen in the crypto space,” he said, adding “the instability in those currencies, high barriers to entry, and frankly some other issues in the industry like fraud and financial crime . . . it meant that [crypto] it has not been as widely adopted as many of the advocates said.”

I pressed Mark Foster, EU policy officer at the Crypto Council for Innovation, on what the near future could be for crypto and blockchain technology, or how it could finally reach the mainstream adoption standard its proponents have been preaching – unsuccessfully – for over a decade.

“In the first phase over the next five years or so. . . there will be even more conversation about how blockchain technology can be used. . . to improve back-office stuff,” she replied. You suggested that it won’t be ordinary people using “self-hosted wallets and all that kind of stuff,” but instead major financial players quietly incorporating blockchain technology for their own internal functions.

It’s uninspiring stuff, especially compared to the promise of AI. In the past, the venture capitalists and developers tasked with building the crypto financial network could convince themselves, perhaps naively, that their work would revolutionize the global financial system, cash in on the unbanked, and fundamentally change the way people own assets. art or real estate.

The crypto bubble of the past few years was based on faith and a good will to build a better world, not to mention that there would be a huge pile of gold at the end of the rainbow. Not anymore.

Tech VCs will naturally transition into the next fashion trend. But this is also true for developers with highly transferable skills. Many won’t want to be accused of association with SEC-stricken companies or be the victim of carpet rolls or large-scale hacks that exploit their own coding errors.

Without fresh blood, this could leave the development of the industry in the hands of a smaller group of devoted developers. Their devotion to cryptography is undeniable, but development also runs the risk of being distracted by obscure technical arguments that the world doesn’t care about.

Bit Digital CEO Samir Tabar has criticized “centralized” crypto firms like FTX that have betrayed the faith of the community, but still have a burning passion for decentralized, permissionless technology.

“Trust the code, not the humans,” he said to close an afternoon panel on blockchain adoption. A fair position to hold, but my only question is: who is going to write the code we are expected to trust?

What is your opinion on the state of blockchain adoption in 2023? As always, please email me your thoughts at scott.chipolina@ft.com.

Weekly highlights

• A few weeks ago I was wondering if the Bahamas would do that to throw sand into the American prosecution machine shooting Sam Bankman-Fried. A court filing this week revealed that the United States has agreed to temporarily suspend some charges, including alleged bribery of Chinese officials. But it’s only a respite. The government still wants to bring charges separately and SBF still faces eight criminal charges.

• This week the renowned venture capital firm Andreessen Horowitz announced a new London crypto office as the first major push beyond the United States. Britain won even though it suffered a more than 50% drop in technology investment this year. Prime Minister Rishi Sunak said he was “thrilled” (at Andreessen’s move, not a lack of technology investment in the UK).

• You may recall last week’s news that the woes of Atomic Wallet, the latest casualty in a crypto industry full of compromised platforms, have been blamed on Lazarus Group, the notorious North Korean-backed cybercrime syndicate. Blockchain analytics firm Elliptic, which first made the link between the hack and Lazarus, this week found that the platform’s cryptocurrency leaks had exceeded $100 million.

• Adding to Binance’s recent issues with regulators, the world’s largest exchange had to shut down in the Netherlands after being unable to register with the Dutch regulator. The news follows a fine imposed on the cryptocurrency giant by the Dutch central bank last summer, which accused Binance to violate its rules, gaining a “competitive advantage” from not paying withdrawals to the bank and skipping compliance costs.

Soundbite of the week: 3AC founders criticized by liquidators

Crypto has had its fair share of bad guys over the past year. For some, topping the list are Kyle Davies and Su Zhu, the co-founders of failed cryptocurrency hedge fund Three Arrows Capital (3AC).

Since the fund’s collapse last summer, the pair reportedly failed to comply with liquidators and started a new cryptocurrency exchange called GTX where users can trade bankruptcy filings. An interview with The New York Times last week also revealed how they spent time in Bali, traveling, painting, drinking, surfing and meditating. Very cute for them, but irritating for others.

The liquidator of 3AC this week filed a motion arguing that Davies should be held in contempt of court for ignoring a subpoena connected to a bankruptcy proceeding and fined $10,000 a day until he complies.

“Not only have they fooled the foreign representatives, this court and their creditors, but now they are trying to profit from this failure.”

Mining: unstable stablecoins

Tether, the world’s largest stablecoin by market capitalization, has been de-pegged to the US dollar. It should be docked 1 by 1.

Its value fell to $0.99, with the latest peg break representing a year-to-date low for the stablecoin, according to CCData.

The chart below serves as a reminder that tether’s peg broke in May and November of last year, the months the cryptocurrency was hit by the crash of Terra and FTX, respectively. Coupled with the brief de-peg of Circle’s USDC stablecoin in the wake of the Silicon Valley Bank collapse, stablecoins are often proving to be anything but stable.

Cryptofinance is edited by Philip Stafford. Please send any thoughts and feedback to cryptofinance@ft.com.