In Crypto ‘Arms Race’ For Mass Adoption, Companies Ink Sports Deals Worth Hundreds Of Millions

As cryptocurrency companies seek to reach mainstream audiences, some platforms are spending hundreds of millions of dollars to sponsor sports teams, stadiums and even leagues in a bid to woo new fans.

On Sept. 22, Crypto.com struck an eight-figure deal with the Philadelphia 76ers to sponsor the jersey patch and have visibility in the arena. The crypto trading app will also work with team management to develop non-fungible tokens (NFTs) and create a way for fans to use cryptocurrency to pay for tickets and other products. The Hong Kong-based company will also show up elsewhere alongside the NBA franchise—including on TV broadcasts and various other digital platforms.

Crypto.com Chief Marketing Officer Steven Kalifowitz recognizes that in order to build the brand, he has to also educate consumers about this new asset class.

“Crypto is not just another shoe,” he says. “It’s not a commodity thing or a suitcase or something. Getting into crypto is very much a cultural thing.”

Flush with money from eager investors, a growing number of crypto brands are spending big to reach a mass audience through sports sponsorships and mainstream events. Other deals this month include the cryptofinance company XBTO sponsoring the Major League Soccer team Inter Miami, the cryptocurrency exchange FTX sponsoring Mercedes-AMG’s Formula 1 team and the nonprofit Learncrypto.com sponsoring the English Premier League team, Southampton F.C.

Perhaps sports arenas are not a bad way to go when it comes to finding new fans for a new—and still largely unregulated—asset class that some critics dismiss as gambling and proponents say is the future of the internet as well as the economy. And in a fast-growing and cluttered market, the fight is to get not just recognition but market share.

“To me it looks like an arms race for user acquisition,” says Keith Soljacich, VP/GD of Experiential Tech at Digitas, a leading digital advertising agency. “It’s kind of like if you have a crypto wallet on a platform, it’s a lot like holding a Visa card, too.”

The 76ers deal is just one of many that Crypto.com has landed in the past year while it’s on an aggressive sponsorship spree totaling more than $400 million in deals. Earlier this month, the company became the first official crypto platform partner for the famous French soccer team Paris Saint-Germain. Crypto.com is also a sponsor of a wide range of teams including the NHL’s Montreal Canadiens, Fox Sports’ college football midday coverage, UFC, and Aston Martin’s Formula One team—just to name a few. Each of these also includes various other integrations far beyond a logo.

Chris Heck, president of business operations for the 76ers, says the team had been looking for a new jersey patch partner for a couple of years and spoken with hundreds of companies. And because the jersey patch is the most important partnership a team has, it requires brands and teams to be “completely aligned.”

“As the world woke up to the crypto space a little over a year ago, we got a chance to venture down that road,” Heck says. “Think about it this way: Sports are entering into the crypto era world, and we get to the at the front of the line with Crypto.com. These are folks that are partnering with gold-standard brands like UFC, F1, PSG, and we get to be their brand and their of choice in the United States with major sports teams and that’s pretty cool.”

All this to go beyond the current crypto user base to reach the masses: A study Crypto.com conducted in July found that total global crypto users have doubled year-over-year from 106 million to 221 million. However, just a fraction of those are currently the company’s customers.

Earlier in September, FTX—a two-year-old startup that just moved its headquarters from Hong Kong to The Bahamas—announced a $20 million ad campaign starring football legend Tom Brady and his wife, the model and businesswoman Gisele Bündchen. And like Crypto.com, FTX is sponsoring a wide range of teams and leagues in rapid succession including a five-year deal with the Major League Baseball announced this summer.

“If we just stop at one deal and we’ll wait and see how it does and wait to see how that does before doing another one, the best opportunities might be gone,” says FTX.US President Brett Harrison.

According to Harrison, FTX founder and CEO Sam Bankman-Fried asked for ideas of how do something “that’s big.” Someone then came up with the idea to buy the naming rights for a stadium, and a few months later they won the rights to rename the Miami Heat’s arena FTX Arena in a $135 million deal approved in March.

“There is a group of tech companies that know it in their bones that if they don’t become brands quickly, there is a time in the future where there will be just a few left,” says Jamie Shuttlesworth, chief strategy officer of Dentsu Americas, which became FTX’s agency of record in June.

Traditional advertising methods are important for building trust in crypto brands, according to Harrison—especially since it deals with something like taking care of people’s money.

“When’s the last time you saw an ad for maybe a bank pop up on the top of your Google search and said, ‘Time to move all my money from my Chase account or Citi account?’”

Major stadium and team sponsorships are often held by brands that are already well known, but the crypto sector’s aggressive land-grab feels in some ways like strategies in games like “Risk” or “Monopoly”—where people can either wait for the right properties or buy everything they can as fast as possible.

When asked about the Monopoly metaphor, Harrison joked that “we’re trying plant our pieces on as many Park Places as possible.”

There’s plenty incentive for sports organizations to team up with crypto companies. Mike Proulx, a Forester analyst and marketing expert, said many sports leagues want—and need—to attract the next generation of fans.

“These kinds of deals look to tap into crypto companies’ young skewing userbase with NFTs that are, in a way, a modern/virtual take on old school baseball cards,” he says. “And the benefit to crypto companies is, of course, getting to leverage the league IP that legitimizes their platform with trusted brands while also growing their users.”

The crypto industry has exhausted its original market, says to R.A. Farrokhnia, a professor at Columbia Business School professor and Executive Director of the Columbia Fintech Initiative. However, blockchain technology isn’t something that’s easily explained to the average person—it involves cryptography, complex networks, and other concepts—and also still aren’t to a point where users can easily navigate.

According to Farrokhnia, there are still questions about whether the foundations and interfaces are advanced enough to warrant the aggressive push toward mass adoption. Or, he asks, “are we putting the proverbial cart before the horse?”

“These are all the moving parts in this ecosystem and it seems the pace for innovation has accelerated,” he said. “But are we doing things in the right sequence?”

Farrokhnia also points out the irony that despite all of cryptocurrency’s new innovations, the companies are still using classic marketing models. However, he adds that little for athletes to market unregulated digital economies than to pitch things like CPG products or other brand categories.

“What kind of reputation risk could this have for teams or sports figures or influencers or actors who are engaging in this kind of marketing campaign or activity? Most likely they have good lawyers that would protect them against such things, but you never know.”

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Source: In Crypto ‘Arms Race’ For Mass Adoption, Companies Ink Sports Deals Worth Hundreds Of Millions

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More Contents:

Wary of Bitcoin? A guide to some other crypto currencies

Consistency of Proof-of-Stake Blockchains with Concurrent Honest Slot Leaders

Gridcoin: Crypto-Currency using Berkeley Open Infrastructure Network Computing Grid as a Proof Of Work

Vertcoin: The Soaring Cryptocurrency Set to Surpass Bitcoin

Out in the Open: Teenage Hacker Transforms Web Into One Giant Bitcoin Network

Exclusive: Grayscale launches digital-currency fund backed by Silver Lake’s co-founder Hutchins

Crypto social network BitClout arrives with a bevy of high-profile investors — and skeptics

Kodak CEO: Blockchain Significant, Though Not a Doubling in Stock Price

Zcoin Moves Against ASIC Monopoly With Merkle Tree Proof”. Finance Magnates

Big-name investors back effort to build a better Bitcoin

Reddit Cracks Down On Forums Trading Images Of Female Vinted And Depop Users

Reddit has shut down forums with thousands of users sharing and selling photos of female members of clothing resale apps like Vinted and Depop.  

Vinted and Depop have become a viral sensation with Generation Z shoppers looking to thrift second-hand clothing from the comfort of the sofa. The apps have also become a hunting ground for men who trade and sell photographs of young women modeling bikinis, bodysuits and other clothing for sale. 

Reddit banned r/NSFW_Vinted and r/vinted_sluts, communities with nearly a thousand members earlier this week after being contacted by Forbes. The social news aggregator, dubbed the “front page of the internet” has shut down two similar subforums sharing images of Depop users, and another Vinted forum in recent months. Despite this crackdown, the site still features several subreddits, some inactive, promoting images taken from Depop and eBay sellers. 

One of the subreddit moderators had compiled download bundles of hundreds of stolen images of female users from Germany, the Czech Republic, and beyond, offering to sell them “for the price of a coffee” on file download site Ejunkie. The download pages have since been taken offline.  

Bryony like many Vinted users started to use the app during the U.K’s Covid lockdowns to clear out her wardrobe of old and unwanted clothing. The 25-year-old from Essex, England, who asked for her full name not to be used, was unaware that a photograph taken to help sell a PrettyLittleThing bodysuit was being traded on the now banned subreddit r/NSFW_Vinted. 

“I’m obviously disgusted that my photos have been taken from this platform and distributed elsewhere without my permission and I find it quite sickening to be honest with you,” says Bryony, who had also received inappropriate messages from users asking to model clothing she was trying to sell on the app.  

“Multiple times I have had inappropriate messages asking for more pictures of me wearing the items I am selling…at first I thought nothing of it and then I clicked it was a little bit weird,” she says. 

Bryony is not the only female seller on clothing apps like Vinted and Depop to have received inappropriate or disturbing messages from men seeking to solicit photos, or used clothing. The BBC and Cosmopolitan reported in January about the problem of young women, and teenagers, being targeted on the apps and other marketplaces like eBay, while Depop users themselves have turned to Reddit to share scores and scores of disturbing direct messages. 

“These creepy messages take total advantage of the nature of sites like Depop and Vinted, which women have used to boost their income during the pandemic,” says Hannah Hart, privacy expert at ProPrivacy. “These downright disturbing incidents further highlight the fact that women face harassment and abuse simply for daring to be visibly female, regardless of which sites they frequent and whether they’ve been intended as social platforms.”

While these user-driven marketplaces are also home to some people who are in the business of selling images of themselves or used clothing to cater to fetishes often in contravention of the terms of services of these apps none of the women contacted by Forbes had intended, or were, aware that their images were being shared.  

Vinted says it takes a tough line on inappropriate messaging and bans users it suspects of breaching its policies. “We also recommend our users to refrain from sharing pictures of them wearing the items if this is asked to them in private conversation and to report the user who asked them that,” a spokesperson for Vinted said in a statement to Forbes

The Vilnius, Lithuania-based app says it tries to stop photos from being take off its platform but had limited control over users’ screenshotting images. “In such cases, we strongly advise our members to report this directly to the respective websites to inform them that imagery is being published without any usage rights and ask for these pictures to be taken down by the said website,” says Vinted’s spokesperson.  

Depop has in the past year pushed Reddit to take down content according to messages sent from the London-based app’s support team to affected sellers. “We take a zero tolerance approach towards predatory or abusive behavior of any kind on Depop. The safety of our community is our number one priority, which is why we have robust policies and advanced technology in place to keep everyone protected,” says Fabian Koenig, VP of trust and safety at Depop. 

Thrifting was once consigned to Goodwill, charity shops, and a corner of eBay but a new generation with small budgets and a passion for sustainability have thrust it into the fashion mainstream and turned secondhand clothing apps into a big business. American online craft marketplace Etsy swooped to buy British clothing app Depop, which has a cult teenage following, for $1.6 billion in June while Vinted raised $300 million in a fundraise that valued the app at over $4.2 billion in May.  

Reddit said it had a blanket ban on the sharing of non-consensual intimate or sexually explicit images, or video, and as such had banned the subreddits involved. The site’s policy of largely relying on users to self-police has repeatedly been tested in recent years with staff stepping in to ban controversial subforums like r/donaldtrump, anti-vaccine, and far-right forums only after facing a prolonged public backlash. Reddit has raised close to $950 million from investors since the start of the year largely to build out its team and advertising proposition. Send me a secure tipIain Martin

Send me a secure tip.

Iain Martin

 Iain Martin

I joined Forbes as the Europe News Editor and will be working with the London newsroom to define our coverage of emerging businesses and leaders across the UK and Europe. Prior to joining Forbes, I worked for the news agency Storyful as its Asia Editor working from its Hong Kong bureau, and as a Senior Editor in London, where I reported on breaking news stories from around the world, with a special focus on how misinformation and disinformation spreads on social media platforms. I started my career in London as a financial journalist with Citywire and my work has appeared in the BBC, Sunday Times, and many more UK publications. Email me story ideas, or tips, to iain.martin@forbes.com, or Twitter @_iainmartin.

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Cryptocurrencies Are Coming Back From the Brink. Here’s Why

After months languishing in the doldrums, cryptocurrencies are surging. On Monday, Bitcoin breached the $50,000 mark for the first time since May. Other coins — including Ethereum, Cardano’s ADA and Dogecoin — also edged higher.

And it was only a few weeks ago that some strategists were eyeing a possible drop to $20,000 for Bitcoin, months after it had hit an all-time high near $65,000 in April.

Instead, sentiment is rising across the board. Crypto’s latest swings are a sign that Bitcoin miners are back in business after a recent Chinese crackdown. At the same time, there is continued evidence of more mainstream acceptance. All of this is happening as the delta variant’s surge has muddied the timeline for a normalization of interest rate policy.

“There’s been an accelerating background of accumulation of crypto assets in the past couple months,” Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX, wrote in an email Monday. “Institutional flows in Bitcoin and Ether as well as a lot of retail activity in NFTs and gaming” are likely contributing, he added.

Here is a look at what is driving the increase — and what could come next:

A Shift in Sentiment

The cryptocurrency world is populated by a cast of characters whose voices can really influence prices. Lately, bullish noises have been boosting sentiment.

Take Elon Musk. Earlier this year, the billionaire caused heads to spin — and helped prices to boost and then plummet — when he said in March that Tesla Inc. would accept payment for its electric vehicles in Bitcoin but backtracked in May. He made his reversal on environmental grounds, expressing concern about the use of fossil fuels for cryptocurrency mining. Following those comments, Bitcoin lost about a quarter of its value in a week.

But here’s the latest twist: Over the past few weeks, Musk has been striking a more supportive tone. In late July he said he personally owns Bitcoin, Ethereum and Dogecoin and would like to see crypto succeed.

Superstar investment manager Cathie Wood is another influential voice in this space. A noted crypto bull, she told Bloomberg TV in May that she could see Bitcoin reaching a price of $500,000. More recently, she said she thinks corporations should consider adding Bitcoin to their balance sheets.

Hash Rate Signals

About a month ago, all the talk in the cryptocurrency world was of a Chinese crackdown. A ban on Bitcoin mining meant the abrupt shuttering of millions of computers that had been processing the transactions necessary to keep the crypto currency humming. Before the ban, around 65% of the world’s Bitcoin mining took place in China.

As computers went offline, the hash rate — a measure of the computing power used in mining and processing — halved in just two and half weeks.

As well as the practical implications, the aggressive moves by China laid bare the fact that the decentralized currency is still at the mercy of governments, which hit sentiment. Bobby Lee, one of the country’s first Bitcoin moguls, even said that China’s crackdown on cryptocurrencies will probably intensify and may even lead to an outright ban on holding the tokens. And in the U.S., a recent congressional debate over crypto rules added to the uncertainty.

However, the hash rate has rebounded and is up from its July nadir, according to data from Blockchain.com.

That recovery has helped restore confidence in the market that cryptocurrencies can flourish even in the face of opposition from legislators around the world.

Keep Your Eye on Jackson Hole

Prices of cryptocurrencies, like gold, tend to suffer when there is the prospect of interest rate hikes. The emergence of Covid’s delta variant may scramble plans to remove crisis-level monetary policy.

If Federal Reserve Chairman Jerome Powell were to strike a dovish note in his speech at the Jackson Hole conference this Friday, that could boost the currency, Oanda analyst Edward Moya said in a note.

The Kansas City Federal Reserve’s annual event, being held virtually again, is traditionally scrutinized for hints on upcoming changes in stance. Some Fed leaders have used it as a platform to explain new initiatives, as Powell did last year in unveiling a new monetary policy framework.

Even More Mainstream — and Main Street — Interest

Huge financial and consumer firms over the past year have increasingly been embracing crypto, giving the asset more legitimacy and driving up the price. Banks, brokerages and securities exchanges have been gearing up to meet demand. A watershed moment came in April with the U.S. stock market debut of Coinbase Global Inc., a crypto trading venue that’s shooting to establish a digital-money ecosystem.

This summer, there has been growing speculation that Amazon.com Inc. may become involved in the cryptocurrency sector. An Amazon job posting published online in July said the firm was seeking a “Digital Currency and Blockchain Product Lead.” After people found out about the post, Bitcoin surged to about $40,000. Amazon shares gained about 1% in New York. The company went on to say that the “speculation” about its “specific plan for cryptocurrencies is not true,” but the fact that the world’s largest retailer is exploring crypto has big implications for the shadowy and often hard-to-access market.

Walmart Inc. revealed it, too, was looking for some crypto help, with a job posting on Aug. 15 with responsibilities that would include “developing the digital currency strategy and product roadmap” and identifying “crypto-related investment and partnerships.” (As of Monday morning, visitors to the website were given a 404 error message.)

So… Where to From Here?

In these final days of summer, it’s now back in vogue to make $100,000 predictions.

As with any investment — or anything, really — it’s impossible to predict the future. But analysts do have a few estimations on how breaching $50,000 has changed Bitcoin’s prospects, at least in the short term.

Bitcoin is “getting nearer the higher end of what I expect as a new trading range in the low-$40,000s to low-$50,000s,” said Rick Bensignor, chief executive officer at Bensignor Investment Strategies.

Daniela Hathorn, an analyst at DailyFx.com, thinks that it may be a while before we see any further bullish momentum because $50,000 is a key psychological level for the currency.

“A pullback towards the $48,000 area would be the first sign of trouble,” she wrote in a note on Monday. “But the positive trend isn’t in any trouble as long as Bitcoin stays above its 200-day moving average at $45,750. Looking ahead, the key challenge for buyers will be to cement further gains towards $55,000 without losing momentum along the way.”

By: Emily Cadman / Charlie Wells / Joanna Ossinger

Source: https://www.bloombergquint.com/wealth/bitcoin-price-surge-reasons-why-ethereum-cryptocurrencies-are-rising
Copyright © BloombergQuint

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As COVID-19 Lockdowns Lift, Fraudsters Shift Focus

What’s the impact on digital fraud as countries ease COVID-19 lockdown restrictions? We recently analyzed billions of transactions in our flagship identity proofing, risk-based authentication and fraud analytics solution suite — TransUnion TruValidate™ — and found the rate of suspected digital fraud attempts across industries rose 16.5% globally when comparing Q2 2020 and Q2 2021.1 In the US, the percentage of digital fraud attempts increased at a similar rate of 17.1% during the same time period.

As fraud attempts on businesses and consumers continue to rise, fraudsters are pivoting to target industries with growing markets. “It’s quite common for fraudsters to shift focus every few months from one industry to another,” said Shai Cohen, Senior Vice President of Global Fraud Solutions at TransUnion.

For example, when looking at financial services, online fraud attempt rates had risen 149% when comparing the last four months of 2020 to the first four months of 2021. Yet, when comparing Q2 2021 to Q2 2020, the rate of suspected online financial services fraud attempts has risen at a much lower rate of 38.3% in the US (18.8% globally).

Where are fraudsters turning their efforts globally? We found gaming, and travel and leisure rose 393.0% and 155.9%, respectively when comparing the percent of suspected digital fraud in Q2 this year and last. In the US, during the same time periods, these rates rose 261.9% for gaming and 136.6% for travel and leisure.

Global Industry Year-over-Year Suspected Digital Fraud Attempt Rate Increases and Declines in Q2 2021

Industry Suspected fraud percentage change Top type of fraud
Largest percentage increases
Gaming 393.0% Gold farming
Travel & Leisure 155.9% Credit card fraud
Gambling 36.2% Policy/License agreement violations
Largest percentage declines
Logistics -32.74% Shipping fraud
Telecommunications -16.35% True identity theft
Insurance -8.33% Suspected ghost broker

Fraudsters capitalize on new opportunities as travel begins to reopen

While volumes remain lower than pre-pandemic levels, travel has seen a significant increase. The daily US Transportation Security Administration (TSA) screenings for many days in April 2020 were below 100,000. However, the busiest day in April 2021 had 1,572,383 screenings, reflecting the growing number of travelers.

Cybercriminals are taking note and acting accordingly. “Fraudsters tend to seek out industries that may be seeing an immense growth in transactions. This quarter, as countries began to open more from their COVID-19 lockdowns, and travel and other leisure activities became more mainstream, fraudsters clearly made this industry a top target,” noted Cohen.

In addition to leveraging credit card fraud (the top type of digital fraud reported to TransUnion by its travel and leisure customers), fraudsters are also quickly adapting to target desperate travelers. Recently, the US State Department temporarily shut down their online booking system for all urgent passport appointments in response to a group of scammers using bots to book all available appointments and sell them for as high as $3,000 to applicants with urgent travel needs.

More than one-third of consumers say they’ve been targeted by COVID-19-related digital fraud

While travel and leisure, and gaming saw the largest increases in suspected digital fraud, 36% of consumers participating in TransUnion’s Consumer Pulse study said they’d been targeted  by a digital fraud scheme related to COVID-19 — across all industries — during Q2 2021.

Phishing was the leading type of COVID-19-related digital fraud impacting consumers in Q2 2021. Stolen credit card or fraudulent charges was the second most cited type of COVID-19-related online fraud, affecting 24% of global consumers.

Suspected Digital Fraud Attempt Rate Increasing Worldwide

For more digital fraud findings, see our entire infographic here.

“One in three people globally have been targeted by or fallen victim to digital fraud during the pandemic, placing even more pressure on businesses to ensure their customers are confident in transacting with them,” said Melissa Gaddis, Senior Director of Customer Success, Global Fraud Solutions at TransUnion. “As fraudsters continue to target consumers, it’s incumbent on businesses to do all that they can to ensure their customers have an appropriate level of security to trust their transaction is safe all while having a friction-right experience to avoid shopping cart abandonment.”

How our TruValidate suite helps businesses detect and prevent fraud

TransUnion Global Fraud Solutions unite consumer and device identities to detect threats across markets while ensuring friction-right user experiences. The solutions, all part of the TransUnion TruValidate™ suite, fuse traditional data science with machine learning to provide businesses unique insights about consumer transactions, safeguarding tens of millions of transactions each day.

Source: As COVID-19 Lockdowns Lift, Fraudsters Shift Focus | TransUnion

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New SEC Boss Wants More Crypto Oversight to Protect Investors

It’s become a parlor game in Washington, on Wall Street, and in Silicon Valley to figure out where U.S. Securities and Exchange Commission Chair Gary Gensler stands on cryptocurrencies. Industry lobbyists tune in when he testifies before Congress. Lawyers parse his speeches. Goldman Sachs Group Inc. wealth advisers recently boasted in a research report about looking for clues in 29 hours of the Blockchain and Money course he developed at the Massachusetts Institute of Technology.

That’s an arduous but perhaps not novel undertaking, since videos of the classes have garnered millions of views online, something that amazes even Gensler. In his first extensive interview about the digital money craze, Gensler signaled that his deep interest in the subject doesn’t mean he’s simpatico with the hands-off oversight approach that many enthusiasts would like to see.

Policymakers have struggled with how to respond to the mostly unregulated $1.6 trillion market, which has seen explosive growth and wild price swings. Gensler is contemplating a robust oversight regime, centered on establishing safeguards for the millions of investors who’ve been stocking their portfolios with tokens. “While I’m neutral on the technology, even intrigued—I spent three years teaching it, leaning into it—I’m not neutral about investor protection,” says Gensler, who on Tuesday will give a speech about crypto at the Aspen Security Forum.

“If somebody wants to speculate, that’s their choice, but we have a role as a nation to protect those investors against fraud.” Gensler has asked Congress to pass a law that could give the agency the legal authority to monitor crypto exchanges, but he says the SEC’s powers are already broad. There’s been much discussion over the years about which kinds of digital assets fall under the SEC’s purview.

Some such as Bitcoin that act like currencies are considered commodities, not securities. But there are thousands of other coins, and Gensler believes most are unregistered securities that must comply with SEC rules. Broadly he noted that technology has sparked economic progress throughout human history, and he sees a similar boost from digital assets. That may only come, however, with strong and thoughtful regulation.

As an analogy, he says the automobile industry didn’t fully take off until governments laid out driving rules. Speed limits and traffic lights provided public safety but also helped cars become mainstream. “It’s only with bringing things inside—and sort of clearly within our public policy goals—that a technology has a chance of broader adoption,” he says.

Hester Peirce, a Republican commissioner on the SEC known for her advocacy of light-touch regulation of digital assets, says she’s eager to work with Gensler. “A lot people just want more clarity,” she says. “I come from a perspective that people should have the maximum freedom to engage in transactions they want to engage in voluntarily. Society needs to have that discussion about what is the right regulatory framework.”

Gensler didn’t give a timeline for any SEC action. He has a to-do list that includes 49 non-crypto policy reviews that could slow progress on cryptocurrencies. Many are high-profile and time-consuming efforts, like responding to the GameStop Corp. trading frenzy and the blow-up of the Archegos family office. The SEC is also working to impose new rules that would require companies to disclose carbon emissions and other environmental risks, a Biden administration priority.

Nor would Gensler comment on the potential for approving a Bitcoin exchange-traded fund, a decision that many in the crypto world are eagerly awaiting, because it would provide an easy on-ramp for investors. A Bitcoin ETF would invest in the cryptocurrency and then trade its shares on the stock market. So far the SEC has balked at permitting such funds, citing concerns about the risk of fraud and manipulation in the Bitcoin market.

Gensler has spoken positively about the ETFs during his days at MIT, giving advocates hope that he’s a supporter. Peirce says it’s “high time” the SEC approved a crypto ETF. Behind the scenes, Gensler has pushed the agency’s staff members to take a look at an array of potential policy changes. He says there are at least seven SEC initiatives looking at different crypto issues: initial coin offerings, trading venues, lending platforms, decentralized finance, stable value coins, custody, and ETFs and other coin funds. “I’ve asked the staff to use all of our authorities anywhere we can,” he says.

Gensler says he thinks regulating crypto exchanges is perhaps the easiest way for the government to get a quick handle on digital token trading. But he’s also concerned about new ways people are getting into crypto, such as peer-to-peer lending on so-called decentralized finance, or DeFi, platforms. If firms are advertising a specific interest-rate return on a crypto asset, Gensler says, that could bring the loans under SEC oversight. Platforms that pool digital assets could be seen as akin to mutual funds, potentially allowing the SEC to regulate them.

Gensler was chair of the Commodity Futures Trading Commission (CFTC) during the Obama administration, where he was responsible for bringing federal oversight to the huge market for derivatives known as swaps after the financial crisis. Patrick McCarty, who teaches a class on cryptocurrencies at Georgetown University’s law school, says Gensler’s understanding of digital assets means he will give the industry a “fair hearing,” though he will likely disappoint many proponents.

“When the crypto people say they want legal certainty, they don’t mean that—they want to be unregulated,” McCarty says. “That’s never been Gary’s point of view.” Christine Trent Parker, who focuses on crypto assets as a law partner at Reed Smith in New York, says that although new SEC rules would bring more certainty to the industry, they also could divide the policing of the market more starkly—with the CFTC focused on markets linked to virtual currencies such as Bitcoin and the SEC handling much of the rest.

“Right now the lines are fuzzy because we have speeches and enforcement and court orders,” instead of bright-line regulation, she says. “If the SEC has sort of a broad framework that pulls in all of the other digital assets, then you have this bifurcated marketplace.” Others have argued that new token developers need some regulatory flexibility to encourage innovation.

Gensler also sits on the Treasury-led Financial Stability Oversight Council and the President’s Working Group on Financial Markets, which recently held a meeting on the impact of stablecoins. These are crypto tokens that are supposed to be backed by traditional currencies such as the U.S. dollar, and they’ve become a huge part of the crypto trading system. Regulators worry about what could happen if some stablecoin didn’t turn out to be worth what it was supposed to be—prompting an exodus akin to a run on a bank or a money-market fund.

Gensler’s views on the panels carry weight, people who follow the issue note, because unlike, say, the Treasury secretary or Federal Reserve chairman, he has real crypto cred. His understanding of blockchain and digital assets comes largely from the several years he spent at MIT. Along with creating the cryptocurrency course, he’s been a frequent guest at industry conferences—sometimes speaking 30 to 50 times a year—mixing with deep thinkers and entrepreneurs.

He quotes writings of Satoshi Nakamoto, the pseudonymous creator of Bitcoin, from memory and knew some of the core developers of the digital currency. The 63-year-old former Goldman Sachs partner traveled an unlikely path to becoming one of the government’s foremost cryptocurrency experts. It started in 2017, when as chief financial officer of Hillary Clinton’s failed presidential campaign he had the lonely job of closing up shop, paying off the final bills, and deciding what to do with the abandoned computers and office supplies.

Like many of his shell-shocked former colleagues, Gensler was looking for something to do—and somewhere to sit out Donald Trump’s presidency. The answer came from economist Simon Johnson, an MIT professor who encouraged Gensler to come to Cambridge, Mass., and teach. Looking to nurture a long-held interest in the intersection of technology and finance, Gensler jumped at the opportunity.

Although he didn’t know much about digital tokens, he connected with people who were part of the university’s burgeoning Digital Currency Initiative and even audited a course in crypto programming. When he suggested MIT teach more about finance and digital money, he was given the job. Little did he know that in a few years he’d have a chance to put his academic studies to real-world use. “Life sometimes is a bit of serendipity,’’ he says.

By: Robert Schmidt

Source: Will Government Regulate Crypto? SEC Chair Gary Gensler on Bitcoin and Oversight – Bloomberg

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