Cryptocurrency is trying to regain your trust

Trust in the cryptocurrency industry has been fractured more than ever during the current crypto crash, in which investors have lost an estimated $800 billion in less than two months. The industry is trying to rebuild its reputation with the cement of “transparency,” a buzzword that is currently everywhere.

The CEO of San Francisco crypto firm Ripple calls for transparency in Davos, Switzerland, where the World Economic Forum is debating the future of digital assets. The Stellar Development Foundation, a San Francisco nonprofit with a long history of solving tough problems in crypto, also calls for transparency. So is a new company with a new cryptocurrency coin and old Bay Area ties.

What are they trying to clarify?

Lawmakers and consumer advocates have warned for years that the industry fails to warn consumers about the risks of rapidly losing large investments or encountering rampant fraud schemes, even as hot assets are hyped in advertisements. Super Bowl and other high profile promotions, some in the Bay Area.

In January, the Golden State Warriors star Klay Thompson tweeted he was “delighted to participate in my payroll in bitcoin thanks to Cash App! I’m with bitcoin because I believe it’s the future of money. The tweet was a promotion for the Cash App banking app in which Thompson and fellow Warriors star Andre Iguodala handed out $1 million in Bitcoin.

But giving away Bitcoin on Twitter may be over, experts say.

In the current crash, a key part of the industry has broken, causing huge losses. Stablecoins were supposed to be the safe bet in crypto because their value is supposed to be in line with real-world currency. They don’t offer the explosive investment potential of other cryptocurrencies, but are a solid medium of exchange for many virtual needs, like long-distance money transfers to people without bank accounts, financial transactions routine or trade in goods and services online. They were supposed to be inviolable.

But Do Kwon, a “crypto bro” with a severe case of hubris, oversaw the downfall of stablecoins Terra and Luna, which weren’t backed by real-world assets, but linked to each other via supposed algorithms. cope with market fluctuations. .

Kwon, a Stanford graduate, once fired economist Fraces Coppola on Twitter stating, “I don’t discuss the poor on Twitter, and sorry I don’t have a change on me for her at this time.”

He should have listened.

Luna’s price has fallen from $97 on April 25 to $0.00016 now. This disaster accounted for only $40 billion of recent losses, or 5%. But the impact was seismic. The industry told the world this could never happen with stablecoins.

“An event as important as Terra and Luna is a very big challenge. We know it sets us back,” says Denelle Dixon, CEO of the Stellar Development Foundation. A lawyer for Yahoo in 2007 when the company came under congressional scrutiny for mishandling data, Dixon is no stranger to Silicon Valley’s struggles to protect new innovations.

“We felt like there was a huge momentum in terms of working with governments and traditional businesses and bringing them into crypto. But those things set you back,” Dixon says, regarding “the brand attached to crypto in general.”

Dixon and others believe transparency on stablecoin backup assets is an important first step to rebuilding the cryptocurrency.

Stellar Development Foundation CEO Denelle Dixon and others say transparency on stablecoin backup assets is an important first step to rebuilding the cryptocurrency. (Craig Lee/The Examiner)

Transparency for stablecoins is crucial to “ensure that people participating feel, buy, and have access to all the financial information they need to feel comfortable that they are in fact backed by the dollar” , Brad Garlinghouse, CEO of Ripple, told Fox Business on May 24. Ripple is a San Francisco company that helps financial institutions with cryptocurrency transactions.

Garlinghouse, whose company has had its own struggles with the Securities Exchange Commission, spoke about the World Economic Forum, where crypto was a key topic. The head of the International Monetary Fund pleaded with investors not to give up on crypto while noting that stablecoins that aren’t fully backed run the risk of “exploding in your face.” Christine Lagarde, President of the European Central Bank, echoed this thought saying, “Coin issuers should have to back their coins with as many dollars as they have coins. It needs to be checked, supervised, regulated,” according to Fortune.

Regulation is coming, including legislation specifically around stablecoins. The Biden administration cited stablecoins as a major concern in a Treasury report in November. In early May, California Governor Gavin Newsom also issued an executive order calling for crypto regulation.

Federal government veterans with ties to the Bay Area are lining up behind a new cryptocurrency that they say offers this transparency. Among them is former United States Treasury Secretary Rosie Rios, who previously served as Oakland’s economic development chief and consultant in San Francisco. Rios says Silicon Valley needs to help rebuild trust in the industry.

“For anyone investing in crypto, it’s important to consider its usefulness and the role your particular investment plays both in Silicon Valley and beyond,” Rios says. “If California is to continue to be the leader in technology and innovation, we must find ways to encourage functionality and the role of crypto in the global economy.”

Rios believes this needs to happen with stablecoins that are actually backed by real-world assets rather than coins “just trading as a floating asset.”

Rios is a director at Unicorn Hunters, the company building unicoin, a cryptocurrency that will be backed by an investment fund, so holders of the coin can receive dividends on investments.

Moe Vela, another director of the company, was director of President Obama’s administration, where he worked closely with Biden. Vela also worked with Vice President Al Gore in the Clinton White House.

“The lack of transparency has caused unprecedented and unparalleled volatility in the investment process,” says Vela. “I can’t stress how important it is that there is a distinction between non-asset backed crypto, traditional crypto which is collapsing now, and asset backed crypto.”

Regulation of stablecoins and other assets can change crypto in the Bay Area and around the world. Promotions encouraging the public to dive may be over. The time for transparency and the stablecoin may have come. Just a few months ago, celebrities were urging consumers to get started. Some of these promotions have not aged well.

If Warriors star Thompson had taken his entire paycheck for the season in Bitcoin during his Twitter promotion earlier this year, he would have lost $19 million, or about half his salary.

Asked for comment, the Warriors declined, noting “As you know markets can go up and down.”

About Rodney Fletcher

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