Chamath Palihapitiya: “Crypto is dead in America” thanks to regulators
Chamath Palihapitiya once predicted that Bitcoin would eventually reach $200,000. Mark Kauzlarich—Bloomberg via Getty Images
Venture investor Chamath Palihapitiya, who once believed that Bitcoin had “effectively replaced gold”, now believes that “crypto is dead in America” due to US regulatory pressure on the sector.
“The US government has definitely turned its guns on crypto,” Palihapitiya said in an episode of All-In podcast, which he hosts, dropped on Saturday.
The investor said that while crypto companies were “probably the most threatening to the establishment,” the sector was also “pushing the boundaries more than any other sector of the startup economy.”
The crypto industry accuses the Securities and Exchange Commission and its chairman Gary Gensler of “regulation by enforcement,” or pursuing lawsuits against cryptocurrency companies instead of setting clear regulations.
“You got Gensler to blame the banking crisis on crypto,” Palihapitiya complained. The chairman of the SEC has singled out two crypto-friendly failed banks, Silvergate Bank and Signature Bank of New York, in congressional comments on the crisis.
The pressure on crypto exchanges is encouraging some companies to look outside the U.S. Coinbase announced last week that Bermuda had granted the company a license to operate in the territory, in what is likely to be the first step toward launching a new offshore exchange.
Crypto exchanges are also thinking of the semi-autonomous Chinese city of Hong Kong, whose government is embracing digital assets and cryptocurrencies as a way to revive its status as an international financial center. The city’s financial regulators have proposed rules to allow retail trading of digital assets, helping connect crypto firms with banks.
It is leading some crypto companies to move their Asia operations to Hong Kong. During a congressional hearing last week, Rep. Tom Emmer (R-Minn.) accused Gensler of “doing nothing to protect ordinary Americans and pushing American firms into the hands of [Chinese Communist Party].” (Cryptocurrency trading remains banned in mainland China, unlike in semi-autonomous Hong Kong.)
On Monday, Coinbase sued to compel the SEC to respond to the exchange’s petition seeking rulemaking, filed last July. “Because we are absolutely convinced that the SEC is breaking the law, we feel we have no choice but to take them to court,” said Coinbase Chief Legal Officer Paul Grewal Fortune. Coinbase also received a Wells Notice, which informs a firm of impending legal action, from the SEC on March 22.
Palihaptiya on Saturday suggested that Coinbase was a company that was “trying to do the right things” in working with regulators.
Not quite $200,000 longer
Palihapitiya used to be very bullish on Bitcoin, telling CNBC in 2021 that he expected Bitcoin to eventually reach $200,000. The cryptocurrency was worth around $39,000 at the time.
Bitcoin would eventually peak at nearly $69,000 in November 2021, before plunging in value in 2022 following several high-profile crypto scandals and interest rate hikes by the US Federal Reserve. The cryptocurrency bottomed out at around $15,500 in December 2022, and has since returned to hovering between $27,000 and $30,000.
Interest rate increases have also hit Palihapitiya’s other investments. The investor was known for taking start-ups such as space tourism provider Virgin Galactic and real estate platform Opendoor to public markets through special purpose buyout companies. SPACs, sometimes known as blank-check companies, are public companies created for the purpose of acquiring a privately held company, which inherits the listing.
Palihapitiya closed two of its SPACs last September after failing to buy a company to go public. “The era of excess, abundance and zero-interest policies has come to an end,” Palihapitiya wrote to Social Capital’s limited partners in early April, continuing that the past year was like “getting cold water on our faces.
Still, some bullish bets on Bitcoin are resurfacing. On Monday, Standard Chartered’s head of digital asset research suggested the cryptocurrency could reach $100,000 by the end of 2024, citing an end to interest rate hikes following the US banking crisis
