Crypto has a leadership problem: What can regulators do?

Crypto scammers are common, and the industry’s loudest and best-known leaders have faced significant legal trouble in recent years.

You know the names:

Sam Bankman-Fried was sentenced to 25 years in prison Changpeng Zhao was released after four months Nader Al-Naji was arrested and faces a maximum sentence of 20 years in prison (if convicted) Arthur Hayes was sentenced to six months house arrest Do Kwon He is arrested and may face imprisonment. facing potentially serious prison time Mark Karpeles, Mt. Gox legal trouble Alex Mashinsky was arrested in 2023 and is currently on trial Charlie Shrem pleaded guilty in 2015 and served a year in prison

Crypto.news has collected some comments about whether the crypto industry has a serious leadership problem or just suffers from a few bad apples. At first glance, it seems like fertile ground for suspicious events.

But still, “is it worse than anything else out there?” asks SkyBridge Capital founder Anthony Scaramucci.

“You could say there are bad apples in other areas of finance,” Scaramucci told us via Saxo. “I would argue that this is no worse than anything else. I would say we are in the process of cleaning this up.

Biden was ‘overly aggressive’

Scaramucci, whose hedge fund adopted Bitcoin (BTC) as an IPO in 2020, spent seven years at Goldman Sachs and has a productive career in finance.

She also served as the former White House communications director for 11 days under former President Donald Trump.

Scaramucci has since soured on Trump and backed Vice President Kamala Harris for the 2024 presidential election. He even revealed at the TOKEN2049 conference in Singapore that he and other cryptocurrency advocates were collaborating with Harris’ campaign to shape more industry-friendly policies if she wins on Election Day, November 5.

For cryptocurrency investors, that’s exactly what they’re looking for: an insider who knows the industry and can lead in Washington, D.C. Their biggest gripe so far has been the Biden administration and the current leadership within the U.S. Securities and Exchanges. Commission (SEC).

Biden-appointed SEC Chairman Gary Gensler has initiated a total of 46 cryptocurrency-related enforcement actions in 2023. This figure is up 53% from 2022, according to Cornerstone Research.

Scaramucci adds that lawmakers are perhaps “embarrassed” by FTX founder Bankman-Fried. Bankman-Fried was found guilty of embezzling an estimated $10 billion in client deposits (Scaramucci’s SkyBridge took a hit when FTX collapsed).

The SEC’s enforcement measures have become even stricter. Since FTX, Gensler has taken action against major players such as Binance, Coinbase, Ripple and Terraform Labs. This has sparked numerous legal battles, including ongoing high-profile lawsuits against Ripple and other major firms in the industry.

Most cryptocurrency tokens qualify as securities under US law and, as a result, fall under SEC oversight.

“Their [the Biden administration] Scaramucci says they are being overly aggressive in their anti-cryptocurrency stance. “You didn’t have to be so aggressive.”

Other crypto professionals share a similar sentiment. Tim Kravchunovsky, founder and CEO of decentralized telecommunications company Chirp, argues that these enforcement actions by the SEC are more like attacks than constructive oversight.

“Crypto investors have been met with confusion, inconsistent policies and, at times, outright hostility,” Kravchunovsky said of the past four years. “Instead of encouraging innovation or providing clarity, [Biden] “management’s actions have increased anxiety and left investors guessing about the future of the space.”

Trump did a 180

Crypto’s public relations nightmare continued last week when US prosecutors filed charges against 15 people from four companies: Gotbit, ZM Quant, CLS Global and MyTrade.

According to the FBI, the firms engaged in fraudulent practices designed to manipulate the market.

But Kravchunovsky insists that scenarios like this “do not represent the whole of cryptocurrency.”

“The industry doesn’t have a leadership problem; it has a trust problem,” he says. “Every time someone like Sam Bankman-Fried makes headlines for fraud, the media vilifies the entire industry in the same way. But remember, in every sector where money flows, opportunists and criminals also flow. “This is not a crypto-specific situation.”

Indeed, crime has infiltrated every corner of finance. It has been reported that more than three trillion dollars of illicit funds have flowed into the global financial system in 2023. This trend is expected to continue, largely driven by the rise of digital technologies that provide new avenues for criminals.

“It is unfortunate that there is a growing list of arrests and indictments among high-profile crypto leaders,” says Trade Nation Senior Market Analyst David Morrison. “There are some who deceive and defraud their customers, deliberately break regulations for their own benefit, etc. There are clearly bad actors. “But it is not uncommon for new technologies and money to collide.”

It’s a grim outlook, but one Morrison expects to improve “if regulations continue to improve in a way that helps the industry as a whole”.

“This will require regulators and policymakers to approach cryptocurrencies with genuine interest and understanding, welcoming its potential while valuing its importance,” he said.

It’s no surprise that the industry sees Trump’s possible re-election as a hopeful development. The 78-year-old candidate seized the opportunity to court a passionate segment of the electorate that is frustrated with the Biden administration. Gemini co-founders Tyler and Cameron Winklevoss are two of its largest donors.

once upon a time crypto skepticalTrump, who has been twice impeached, is now among the industry’s fiercest cheerleaders. In fact, he is preparing to sell his own token to the public as of Tuesday, October 15, under the World Liberty Financial brand he founded with his three sons.

Polymarket, a platform that allows gamblers to bet on real-world events using crypto, shows Harris currently ahead by more than eight percentage points in its 2024 presidential prediction.

But in an industry marred by illegalities, is Trump, the first former US president to be convicted of felonies, the best bet for cryptocurrency? Even the staunchest supporters of Republicans have bad feelings about World Liberty Financial.

“Whether you like Trump or not, his World Liberty Financial initiative shows that he is not shy about cryptocurrency,” says Kravchunovsky. “Say what you will about this hype, but at least it isn’t trying to kill the industry with endless regulations.”

Advice to Harris

Crypto is one area where Harris has seemingly diverged from Biden. At an event in Manhattan last month, the Democratic nominee said he wants to embrace “innovative technologies” such as digital assets while protecting consumers and investors.

Billionaires Mark Cuban and Ben Horowitz are also on board; So did Ripple’s co-founder Chris Larsen, who made the first recorded cryptocurrency donation to his campaign.

If Harris wins the election, Morrison offered some advice on behalf of his crypto colleagues: “If Ms. Harris wins next month, then please don’t relegate cryptocurrencies to the ‘Can’t be bothered’ bucket.”

He adds that cryptocurrency has the potential to help the unbanked and “increase entrepreneurship in some of the poorest and most neglected places on our planet.” “Don’t dismiss this just because Donald Trump talks about it a lot.”

Kravchunovsky agrees.

“If Harris takes office, he needs to understand that crypto is not just speculation, it is a transformative technology that can redefine industries,” he said. “But here’s the thing: He needs to listen to people who really understand blockchain, not overhyped artists or bureaucrats who only think in terms of control. It’s not about shutting it down, it’s about creating a healthy environment for it to thrive in a responsible way. “The United States cannot allow fear or misinformation to drive policy.”

As Scaramucci puts it: “The best days for crypto are still ahead.”