Winter is Still Here: How to Survive it and Come Out Stronger
The collapse of a number of high-profile exchanges and the contagion effect that followed them have plunged the crypto industry into a longer, deeper winter. Is there a light at the end of the proverbial tunnel? Yes, and here’s how we can move quicker towards it.
When the FTX house of cards came tumbling down, they destroyed whatever minute hopes many of us might have harbored about the crypto market being well on its way to recovery. While it may be tempting to now demonize crypto’s volatility and the space’s lack of regulation, we must bear in mind that FTX’s collapse was caused not by crypto as an asset class but by the company’s shocking lack of transparency and corporate governance.
The full extent of the damage caused by FTX’s demise is still unknown, but one thing is for certain: the industry now has to work much harder to regain the trust of investors, both retail and institutional. So, is winter the best time to do so? For Bitstamp, there is no doubt the answer is a Yes.
Warming Up to Regulators
With spooked investors pulling funds from crypto, analysts are saying that more pain is bound to come our way. In short, the “crypto winter” is about to get even more bitter. However, some are saying that this winter is also doing the industry a favor: flushing out players who have taken advantage of their customers’ trust in them to misuse funds and who have little to no regard for risk.
“The FTX saga demonstrated the importance of always placing your customers first,” says JB Graftieaux, CEO of Bitstamp, the world’s longest-standing crypto exchange. “At Bitstamp, customer assets are held separately from corporate assets, and we do not, and will never, lend or stake any funds without our customers’ permission.”
As the crypto winter draws on, the executive believes it is time for crypto players to reassess their values and put in place more compliant and transparent business practices. “Crypto is growing up and to solidify its investment use case within the ranks of securities, properties, and other investment grade assets, we need to work with regulators. For firms that are serious about their offering and how they can drive mainstream adoption of crypto, there’s a lot of incentive to innovate and work within regulatory frameworks that are designed to create a level playing field for a market to thrive.”
To deliver top-rated crypto services, it certainly helps to have a global regulatory footprint and the appetite to invest in growing one. This has always been a major investment for Bitstamp. In its 11 years in business, Bitstamp has always sought out licenses in the markets it operates in and currently has 50 licenses globally.
Deliver on Your Education Agenda
Even as regulators around the world are increasing their scrutiny of crypto, market participants must not think that regulation equals a sure return on their investment. It is worthwhile mentioning here that retail participants need to have a balanced view of regulation, how it mitigates some of the risks they face, and what self-responsibility they also need to take.
“Crypto education goes beyond basic investment know-how and the fundamentals of blockchain technology,” says Graftieaux. “It is also about understanding what regulations can and cannot achieve. When we talk about crypto literacy, we are also talking about inculcating the right frame of mind towards the asset class.”
Helping customers be aware of the risks and understand the investment thesis is necessary to achieving consumer protection outcomes. Many investors may have entered the market under the wrong impression that crypto could be their ticket to getting rich quick. Crypto companies have the duty to correct this. “Our Crypto Pulse survey found that 38% of retail investors said they ‘really don’t know enough to get started’ as a barrier to entering the market. Crypto and Web 3 should not be an exclusive playground for the tech-savvy or investors from a certain demographic. At the end of the day, the company that succeeds in educating the average man on the street about crypto will win because education drives trust and trust drives adoption.”
Turn On Your Crypto Now
When the market is down, it is tempting to run and take cover. However, one cannot ignore the macro shift happening right before our eyes. Increasingly institutions are including crypto as part of their offerings to their clients. Those who wish to be part of this growing movement should most certainly take the opportunity to build out their crypto capabilities.
From tech to KYC processes and regulatory requirements, the journey to operationalizing your crypto business can be daunting and resource heavy. But it doesn’t have to be that way. Access to crypto can be easily achieved with white-label solutions that include KYC capabilities and the necessary licenses.
And here’s where it is important to find the right partner. When looking for a crypto partner, it’s important to identify one with a proven track record, strong history of compliance, and a customer-centric approach. By adopting the right white-label solution, companies can continue to evolve their capabilities while owning the customer relationship throughout.
“If your business waits until the next bull market to start building your crypto offering, it’ll be far too late. Don’t underestimate the time and effort it will take to create products and services that are safe, secure, and user-friendly,” says Graftieaux.
The Road Ahead is Long but…
…we must remember that markets, including the crypto market, are cyclical. That means that when the markets are down, it’s time to build. Business leaders should be preparing to meet the demand for Web3’s next boom. By investing in a compliance-forward strategy, building out your capabilities, and educating your customers, you’ll be well positioned to emerge from this crypto winter stronger and well-positioned to capture new markets in the months and years ahead.
About the Author
This article has been authored by Jean-Baptiste Graftieaux, Global CEO of Bitstamp.