At the latest Rosenblatt and Memery Crystal Breakfast Briefing, held in partnership with The Realization Group on 6 December, digital and crypto industry specialists came together with guests representing the spectrum of industry practitioners to review the year from a Web3/digital technology perspective. Rosenblatt Partner Laura Clatworthy and Memery Crystal Head of Financial Regulation, Daniel Tunkel, were joined by industry experts Helen Disney (The Realization Group), Alex Batlin (Bitpanda Custody), Eva Lawrence (Figment) and Hirander Misra (GMEX).
- FTX and other ‘crypto crashes’ in 2022 more about failings in ‘traditional’ asset/liability and risk management, governance and due diligence, less the fact that they were ‘crypto’ businesses.
- Regulation doesn’t mitigate desire or ability of bad actors to do bad things. Those with an interest to defraud people or systems will always exploit new access channels, including ‘new’ crypto markets.
- FTX failure highlights need for greater segregation of activities e.g. market-making, custody, lending, hypothecation etc. Can’t have all eggs in single crypto entity baskets.
- Blockchain facilitates ‘hyper transparency’ in digital asset transaction lifecycles; public record of every transaction – and related action – on public record (nowhere to hide). This offers greater market stability even without regulation.
- Perception/reality gap between high level Government/regulator proclamations about UK’s leadership in financial technologies and markets and reality of ongoing prevarication and procrastination with respect to regulatory approvals and market supervision.
- Regulators need to hire individuals that can read code and decipher smart contracts; without that skillset it’s challenging to effectively oversee digital assets and digital businesses.
- Should (and can) regulation (among other things) be decentralised, removing regulatory blocks and bringing much needed efficiency, via “baked-in” compliance in token issuance and other digital assets?
- Data privacy and protection remains a key challenge, particularly with respect to smart (programmable) money. Decentralisation of personal data and how ownership is transferred to the individual is biggest challenge for next 5-10 years.