The near collapse of the terra-luna stablecoin network in june, and the insolvency of leading crypto lender Celcius a few weeks later shook the nascent market. The price of bitcoin, the world’s largest cryptocurrency, is down over 60% in the past year, while Ethereum is down nearly 70%.
Bacina, who was elected chairman of industry body Blockchain Australia earlier this month, declined to comment on FTX’s unpaid legal bill. But he acknowledges that the sector he now represents faces serious headwinds.
“Given what has happened over the past few months, many companies are likely to delay or withhold [blockchain-related] projects like they did last crypto winter,” he says.
But he also says that many traditional financial services (known as “TradFi” in crypto circles) and professional services providers are quietly pursuing their adoption of Web3 technologies – although they might be less eager to talk about it. publicly than a year ago when crypto markets were trading at all-time highs.
“Smart businesses now understand the power of this technology and are increasingly engaging,” Bacina says. “They see how blockchain will soon disrupt their business models and how it provides opportunities to deliver more efficient services.”
Piper Alderman is far from the only mainstream company supporting crypto. Blockchain Australia has major brands as members including KPMG, Deloitte, PwC and the Australian Securities Exchange.
Goldman Sachs was not only discouraged by the FTX saga, but the investment bank sought out discounted crypto companies amid the scandal, in order to double its exposure to the market, according to Reuters.
Goldman CEO Rosie Hampson extolled the virtues of the blockchain at the recent COP27 summit in Egypt, sharing his enthusiasm for the “Genesis” project, which uses digital tokenization to track the carbon emissions impact of green bonds for investors.
Rather than triggering a massive withdrawal from the industry, FTX has instead allowed major mainstream blockchain projects to fly under the radar, Bacina says.
He points to Tennis Australia’s announcement that over 6,000 Australian Open Art Ball NFT holders will have access to free passes to the physical event in January, as well as a range of virtual events. and “experiences”.
“We provide fans with truly unique experiences and create memories that last a lifetime,” said Ridley Plummer – who holds the telling job title of “Senior Director of Metaverse, NFTs, Web3 and Cryptocurrency.” at Tennis Australia – in a press release dated November 28.
Bacina also highlights the Lygon Project, of which it is a “very small” shareholder, alongside three of the four major retail banks (Commonwealth Bank, ANZ and Westpac). Lygon is moving the age-old process of bank guarantees (commercial contracts where banks guarantee that a customer can pay their debt) from a paper-based system to blockchain.
“Lygon is exactly the type of use case that paves the way for great innovation,” he says.
“Bank guarantees are not an exciting instrument. People like to talk about crypto and blockchain changing the world, increasing financial inclusion, or replacing banks – but ultimately there will be incremental improvements in various ways to make business smoother, which is in itself very valuable.”
While they have invested in Lygon to modernize back-end processes, the big banks’ relationship with the industry seems more strained. In a submission to the Treasury dated June and published this month, the Australian Banking Association revealed that its members have an ambition to “participate in the crypto industry in a range of roles, including providing products and services to meet customer demand.
The ABC went further in its own submission to the Treasury on crypto regulation, supporting the idea that there is “great potential arising from crypto assets and the distributed ledger.” [blockchain] Technology.” He said he still plans to continue with his controversial plan to allow customers to trade crypto assets through his banking app.
But rivals ANZ and National Australia Bank have ruled out any foray into crypto trading. Maile Carnegie of ANZ told the Australian Financial Review Banking Summit in May, it would negate efforts to improve the “financial well-being” of customers.
In an unlikely alliance, big banks and the Australian Securities and Investments Commission, the corporate regulator, have agreed to call on the Albanian government to classify crypto assets as financial products. This would bring the crypto sector into the current financial services regime, rather than establishing a separate crypto-specific licensing regime.
A senior technology executive tells Financial analysis this is an effort by banks and the regulator to “kill” crypto start-ups and “control the blockchain”, given that the sector would be subject to the infamously complex financial services laws and compliance costs that accompany them.
Bacina says the industry is pushing for regulation and its introduction next year will bring certainty and help the sector rebuild its standing with the public. But he says these regulations must be “fit for purpose”. Blockchain Australia strongly opposed calls to classify crypto assets as financial products in its submission.
“It’s concerning to see regulation by enforcement increasing in recent months, as it can chill and discourage regulatory engagement, push jobs and economic growth overseas, and expose customers,” he says.
The comment is likely a reference to ASIC’s recent crackdown on alleged violations of licensing laws or disclosure by issuers of crypto products, including fund manager Holon and Comparison site search.
Banks and financial institutions will fill the void created by the exit of FTX.
— Jeremy Britton, Boston Trading Co.
A number of cryptocurrency exchange-traded funds were also removed from the listwhile Cosmos Asset Management – a local company that spent years trying to create crypto ETFs through Australia’s conservative legal and market systems – went into administration. These events have further narrowed the options for local crypto investors and weighed on confidence.
But Jeremy Britton, Australian-born founder of global crypto fund manager Boston Trading Company, says he continues to see demand from institutional and wholesale investors. While retail investors have been spooked by the FTX saga, many professionals are still bullish on the sector, long-term, he says. And that includes the big banks.
“I think more banks and financial institutions will fill the void created by the exit of FTX and other exchange or custody services,” he says. “Those customers who are newly crypto-curious may trust more established businesses with their money and personal details than smaller unknown or unproven start-ups.”
The flow of venture capital to the sector also remains high. A total of $19.9 billion in capital has been deployed into crypto businesses this year, according to research house Pitchbook. Flows are expected to surpass the “breakout year” of 2021 (which saw $21.2 billion deployed), even as deal activity dries up in the fourth quarter.
Analysts are closely watching the impact of the FTX saga on short-term investment appetite. At least some of the local crypto businesses will be getting a Christmas card.