The collapse of several high-profile exchanges and the contagion effect that followed them have plunged the crypto industry into a longer, deeper winter. When the FTX house of cards came tumbling down, they destroyed whatever minute hopes many of us might have harboured about the crypto market being well on its way to recovery.
While it may be tempting to demonise now 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 sure: the industry now has to work much harder to regain both retail and institutional investors’ trust.
So, is winter the best time to do so? For us at 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 say that this winter is also doing the industry a favour: 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 consistently placing your customers first. 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, we at the world’s longest-standing crypto exchange believe it is time for crypto players to reassess their values and implement more compliant and transparent business practices.
Crypto is growing, and to solidify its investment use case within the ranks of securities, properties, and other investment-grade assets, working with regulators becomes inevitable.
For firms that are serious about their offering and how they can drive mainstream adoption of crypto, there is a lot of incentive to innovate and work within regulatory frameworks designed to create a level playing field for a market to thrive.
Also Read: Temasek says FTX could have duped it
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 our 11 years in business, we have always sought out licenses in the markets we operate in and currently have 50 licenses globally.
Deliver on your education agenda
Even as regulators worldwide 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. It is also about understanding what regulations can and cannot achieve. When discussing crypto literacy, we must also consider inculcating the right frame of mind towards the asset class.
To achieve consumer protection outcomes, it is essential to help customers be aware of the risks and understand the investment thesis.
Many investors may have entered the market under the wrong impression that crypto could be their ticket to getting rich quickly. Crypto companies must correct this.
In Bitstamp’s last Crypto Pulse survey, 38 per cent of retail investors cited “they really don’t know enough to get started” as a barrier to entering the market.
Crypto and Web3 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 person 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, running and taking cover is tempting. However, one cannot ignore the macro shift happening before our eyes. Increasingly institutions include crypto as part of their offerings to their clients. Those who wish to be part of this growing movement should undoubtedly take the opportunity to build their crypto capabilities.
Also Read: What you should know about the correlation between crypto and the macro environment
The journey to operationalising your crypto business can be daunting and resource-heavy, from tech to KYC processes and regulatory requirements. 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 compliance history, and a customer-centric approach.
By adopting the right white-label solution, companies can continue evolving their capabilities while owning the customer relationship.
It’ll be too late if your business waits until the next bull market to start building your crypto offering. Don’t underestimate the time and effort it will take to create products and services that are safe, secure, and user-friendly.
Adopting a plug-and-play solution such as Bitstamp-as-a-Service could dramatically speed up your institution’s crypto adoption.
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 better able to capture new markets in the months and years ahead.
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