“Crypto is dead in America,” says tech investor Chamath Palihapitiya

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Tech investor Chamath Palihapitiya, who two years ago said bitcoin replaced gold and predicted the digital currency would soar to $200,000, has a much more cautious view of cryptocurrencies these days.

“Crypto is dead in America,” Palihapitiya said on the latest episode of the All-In podcast.

Palihapitiya blamed the demise of crypto largely on regulators, who have become much more aggressive in their pursuit of bad actors in the industry. Securities and Exchange Commission Chairman Gary Gensler said crypto trading platforms should adhere to strict US securities laws.

While answering questions before lawmakers recently, Gensler linked the collapse of Silicon Valley Bank to the crypto industry.

“You even have Gensler blaming the banking crisis on crypto,” Palihapitiya said. “US authorities have firmly pointed their guns at crypto.”

The SEC has stepped up its enforcement of the crypto industry, going after companies and projects that the regulator says were selling unregistered securities.

In February, the agency proposed rules that would change which crypto firms can hold client assets, and in March the SEC issued a crypto exchange noticeCoinbasea Wells, warning the company that it had identified violations. potential under US securities law. (A Wells notice is usually one of the last steps before the financial regulator issues a fee.) Last week, the SEC accused crypto-asset trading platform Bittrex and its ex-CEO of exploiting an unregistered stock exchange.

Coinbase CEO Brian Armstrong told CNBC that his company is bracing for a years-long court battle with the commission and is also considering moving outside the United States if it doesn’t get better regulatory clarity. Meanwhile, Bittrex has already announced that it will end its operations in the United States, in particular due to “continuing regulatory uncertainty”.

They “were probably the biggest threat to the establishment,” Palihapitiya said, referring to crypto companies. “And they are the ones who, in fairness to regulators, have pushed the envelope more than any other sector of the startup economy.”

“Now they are paying the price,” he said. “The bill is overdue for them.”

Gensler faced similar criticism from House Republicans over the agency’s crackdown on cryptocurrency platforms during four hours of congressional testimony last week.

“Regulation by enforcement is neither sufficient nor sustainable,” said House Financial Services Committee Chairman Rep. Patrick McHenry, RN.C. “You are punishing digital asset companies for allegedly not following the law when they don’t know it will apply to them.”

McHenry said the SEC’s approach “drives innovation overseas and puts American competitiveness at risk.”

Gensler defended the agency’s actions.

“We have a clear regulatory framework built over 90 years,” he said, adding that exchanges “are generally non-compliant, and they need to come into compliance.”

Bitcoin, the largest cryptocurrency, hit an all-time high of around $69,000 in November 2021, when the Federal Reserve’s benchmark interest rate was near zero and investors were flocking to risk. The market changed hastily last year as the Fed began steadily raising rates to fight inflation.

In early 2021, Palihapitiya predicted on CNBC that bitcoin would rise from $39,000 at the time to $100,000 and then up to $200,000.

“When, I don’t know,” he said. “Five years, 10 years, but that’s okay. And the reason for that is every time you see all of this happen, it just reminds you that, wow, our leaders aren’t as trustworthy and reliable as they are. Before.”

Later in 2021, just before the peak, he said bitcoin had “effectively replaced gold”.

Bitcoin is currently trading at just over $27,300, down 60% from its all-time high.

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