Crypto Needs A Lender Of Last Resort And More Regulation As Crypto Winter Intensifies – Ben Samaroo


(Kitco News) – Sam Bankman-Fried cryptocurrency exchange FTX has bailed out crypto lender BlockFi with a $680 million deal. The move comes amid challenges for the crypto industry, with companies like Three Arrows Capital and Voyager facing bankruptcy, and others such as Celsius and Babel Finance freezing withdrawals and transfers.

These developments mean we need better crypto regulation and lender of last resort facilities, said Ben Samaroo, CEO and co-founder of WonderFi, a Canadian DeFi company.

“All of this carries over to the need for regulation in this space,” Samaroo said. “We need to know who is behind [these crypto firms]how their operating policies and procedures work, all that.”

Samaroo spoke with David Lin, presenter and producer at Kitco News.

Crypto Lending Regulation

During bull markets, investors hate regulations, while during bear markets, investors demand more regulations to protect their troubled assets, Samaroo said.

“It’s the mob mentality,” he explained. “Warren Buffett calls it the lemming effect. When things are going well, people just go with the flow and don’t think about the risks, the repercussions, and they don’t call for regulation. It’s all about growth, how to make more money.”

Crypto lending platforms, like Celsius, offer customers a return on their deposits of Bitcoin, Ethereum, and other cryptocurrencies.

Samaroo said regulators will now look at “how platforms offer their customers interest on deposits, and what happens behind the scenes” in terms of leverage and loan controls.

Crypto Exchanges

The Securities and Exchange Commission recently rejected Grayscale’s application for a Bitcoin spot ETF. Samaroo suggested that regulators are cautious and risk averse, due to bearish trends in the crypto industry.

“Regulators care most about the end user, the customer, the investor,” he said. “We are definitely going to see a dip in the crypto market, which is tied to how regulators approach things. regulators are going to take their time getting to grips with things like a Bitcoin ETF.”

He pointed to the QuadrigaCX scandal, which involved a crypto CEO who allegedly gambled his client’s cryptocurrencies and stole passwords for offline cold wallets.

“We’ve seen this story before with the Quadriga debacle that happened in 2017, and then we didn’t see the first regulated crypto exchange until 2021,” Samaroo said. “It’s been four years. So, [regulators] moving slowly, but it’s generally the right direction despite all the pain and suffering that occurs along the way.”

To find out how long Samaroo thinks Crypto Winter will last, watch the video above.

Follow David Lin on Twitter: @davidlin_TV

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