Crypto Industry Executives Discuss Future of Digital Asset Market at Consensus 2023
A quartet of high-profile executives in the crypto industry discussed the potential changes to the digital asset market at Consensus 2023 in a wide-ranging panel discussion. The executives included BitGo CEO Mike Belshe, Kraken Managing Director North America Guy Hirsch, Cboe Digital President John Palmer, and Cumberland DRW Global Head Chris Zuehlke.
Crypto Innovation and Regulation Can Coexist, Say Industry Executives
During the panel discussion, the executives agreed that crypto innovation and regulation can work together. They noted that smart regulation, stemming in part from the debacles of 2022, could benefit the crypto industry by giving companies clearer guideposts and increasing public trust in the asset. Zuehlke added that the industry had already made significant progress in a short period and that there’s no reason why innovation and regulation have to be mutually exclusive.
New Challenges for Crypto Industry Discussed
The panelists discussed the challenges that the crypto industry faces as it rebounds from a tumultuous year in 2022. Trust in digital assets waned, and a number of major crypto-focused firms imploded. Regulators, particularly in the U.S., are now closely monitoring the industry, and some observers believe that this scrutiny will hurt the industry’s growth or shift the balance of power outside the U.S. The panelists discussed the following issues:
- New challenges for liquidity and prime brokerage
- How custodial services will change
- Regulatory issues and requirements for exchanges to prove their reserves
Industry Anxieties about Regulation’s Impact
While the panelists noted industry anxieties about regulation’s potential dampening impact, they emphasized that the relationship between crypto firms and regulatory agencies must not be contentious. Palmer noted that Cboe Digital’s conservative offerings, which once seemed like a hindrance to adoption, have now become a strength as investors search for safe, trusted vehicles to store their assets. Cboe Digital offers exchange and clearinghouse services for crypto spot and derivatives markets.
Protecting Client Assets and Separating Assets
The Kraken exchange’s Hirsch highlighted the need to protect client assets by creating environments where customers “can trust the venues” where they engage in digital asset transactions. The group also emphasized the need for separating assets, but noted that notable crypto failures of 2022 were related to fraud more than structure. Hirsch said that the challenges that befell the crypto industry in 2022 can provide an opportunity moving forward, specifically via proof-of-reserves accounting. He said that the cryptographic method allowing for verification of assets can be more reliable than audits in traditional finance.
The Migration to Bitcoin and Other Digital Assets
Zuehlke said that despite the crypto industry’s woes in 2022, the banking industry’s recent near meltdown and lingering concerns about its vulnerabilities prompted a migration to bitcoin and other digital assets. He added that “the cat’s out of the bag” and that bank deposits are risky in a way that people didn’t understand. Zuehlke also noted that bitcoin has grown more resilient, with price dislocations becoming less frequent and significant, despite recent contractions in liquidity.
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