Georgia’s cryptocurrency players assess the fallout from the FTX implosion

Many Americans were already disillusioned with cryptocurrency before prices plummeted this year and several high-profile companies failed. A Pew Research poll in July found that at the time, roughly one in six Americans had invested in or traded cryptocurrency. But almost half of these investors say the results were worse than expected.

Bankman-Fried’s fall hit crypto trust even more difficult. Cryptocurrency investors big and small have already pulled out billions of dollars. The cryptocurrency market, which stumbled when FTX declared bankruptcy in November, continues to struggle with wild price swings and lower values.

One bitcoin, one unit of the world’s most popular cryptocurrency, was worth almost $50,000 in January. As of Friday, one bitcoin was worth less than $17,000. Other cryptocurrencies have seen similar declines, with Ether and Binance Coin both losing more than half their value since January.

Still, many of Georgia’s ever-growing cryptocurrency businesses and miners see opportunity in the fallout.

“It’s a very positive long-term event,” said S. Matthew Schultz, executive chairman of CleanSpark.

CleanSpark is a Nevada-based Bitcoin mining company with four mining facilities in Georgia. Bitcoin has advantages that other cryptocurrencies may not, Schultz said. It is decentralized, meaning it is not controlled by one party. Each transaction is also publicly recorded and observable in the blockchain code, which discourages fraud, he said.

Meanwhile, FTX became centralized, controlling cryptocurrencies such as FTT.

Bankman-Fried’s fall is part of cutting out the “confusion and clutter” of cryptocurrency, Schultz said. He hopes it will highlight the benefits of Bitcoin to consumers and investors.

“I was at a conference and someone compared the FTT token to the suitcase full of IOUs in the movie ‘Dumb and Dumber,'” Schultz said. “It’s a huge win to get rid of people who [Bankman-Fried].”

In October 2021, the Department of Justice announced its National Cryptocurrency Enforcement Team, which investigates the criminal use of cryptocurrency. Then in February, the department reported that the founders of BitMEX, a cryptocurrency exchange platform, would pay $20 million to specifically avoid establishing an anti-money laundering program. Two days later, cryptocurrency lending company BlockFi agreed to pay $100 million in fines after the Securities and Exchange Commission accused the platform of failing to register offers and sales.

Other companies have filed for bankruptcy, unable to handle market pressure. Cryptocurrency hedge fund Three Arrows Capital fell in June after two cryptocurrencies, Luna and TerraUSD, collapsed. A month later, cryptocurrency broker Voyager Digital filed for bankruptcy. So did cryptocurrency lender Celsius Network.

These events and more are part of a larger pattern of cryptocurrency culls, said Dan O’Prey, head of Bitcoin and crypto at Bakkt. Bakkt is an Alpharetta-based company that offers an app to manage digital assets like cryptocurrency — and it’s also one of the companies rocked by the fallout.

Bakkt stock traded at $1.42 on Friday, down from an annual high of $7.29 in February. The company reported a net loss of $1.5 billion in the third quarter, and Intercontinental Exchange, which founded the company, recently wrote off $1.1 billion of its Bakkt holdings. Bakkt announced this month that it would lay off 15% of its employees.

Still, the market has a “short-term memory” and interest in cryptocurrency will return, O’Prey said. A Bakkt survey published on December 13 – executed before Bankman-Fried’s arrest, but after FTX’s bankruptcy – found that only half of cryptocurrency users remembered recent crypto market news. For the “crypto-curious,” or people interested in trade, the figure dropped to a third.

“[Bankman-Fried’s fall] is a good opportunity for those units that are well-run to step in, for the adults in the room to come and fill the gap,” O’Prey said.

‘Wild West’

What remains uncertain is how cryptocurrency regulations may unfold.

On Wednesday, U.S. Sen. Elizabeth Warren, D-Mass., introduced a bipartisan bill reduce cryptocurrency crime. Among other things, the Digital Asset Anti-Money Laundering Act would allow the Financial Crimes Enforcement Network to designate cryptocurrency companies as “money services businesses,” placing them under Bank Secrecy Act regulations. It also cracks down on anonymity, prohibiting financial institutions from touching cryptocurrency that has been “mixed,” and hiding transaction parties.

O’Prey said he welcomes “thoughtful” regulations for centralized cryptocurrency platforms. CleanSpark’s Schultz argues that regulation is critical to Bitcoin’s growth, adding security that will draw consumers. Part of this process may even include taxation, he said.

But not all crypto users support regulation.

Richard Clarke, an independent cryptocurrency consultant and organizer of the Bitcoin Atlanta Meetup, has been involved in cryptocurrency mining and trading for 10 years. He was first attracted to the currency because of the freedom that comes from its detachment from traditional bodies such as banks or governments – but regulations would end that, he said.

“[Regulators] come in after the rampage, count the bodies, string someone up, say, ‘Oh, we’ve got him!’ And then they expand their authority, Clarke said. “All regulation really serves to do is stifle competition.”

Robert Daniel, a financial technical advisor at the Georgia Institute of Technology’s Advanced Technology Development Center, understands the hesitancy of regulation. Certain types of crime such as fraud have always been punishable, but other cryptocurrency activities remain in an undefined legal haze.

Good regulations are those that allow assets to flow as uninterrupted as possible while protecting traders, Daniel said.

“It’s still been a bit of the Wild West,” he said.

What is cryptocurrency?

Cryptocurrency is digital currency created and traded online. Unlike traditional money, it is not backed by a government or bank. There are many types of cryptocurrency, but the most popular are Bitcoin, Ether and Tether. Cryptocurrency is not printed, but “mined” – a process where specialized computers solve puzzles to release new coins and verify transactions in a code called the blockchain. Since the inception of cryptocurrency in 2008, its market capitalization has now hovered around $1 trillion.