Crypto & DeFi:
Business Edge Finance 2023
Presenter: Andreas Park
From a slow slide to a thorough crash
-75%
-75%
!
The Terra Implosion
UST Stablecoin
LUNA (cryptocurrency of the TERRA network)
A timeline
May 7: selling pressure on UST from Curve withdrawals
May 12: LUNA and UST at $0.01
June 27: Three Arrows Capital ordered to liquidate
June 12: Celsius Network suspends withdrawals
July 13: Celsius files for Chapter 11
July 6: Voyager Digital files for Chapter 11
July 4: Vault suspends withdrawals
Three Arrows Capital lost >60% of value and faces numerous margin calls that they did not react to
partially "saved" by \(\ldots\) FTX
The FTX Implosion
A timeline
May 7: selling pressure on UST from Curve withdrawals
May 12: LUNA and UST at $0.01
June 27: Three Arrows Capital ordered to liquidate
June 12: Celsius Network suspends withdrawals
July 13: Celsius files for Chapter 11
July 6: Voyager Digital files for Chapter 11
July 4: Vault suspends withdrawals
Three Arrows Capital lost >60% of value and faces numerous margin calls that they did not react to
partially "saved" by \(\ldots\) FTX
all centralized!
Path forward
- blockchain as an idea will not become uninvented
- there is continuous research & development, including by universities
- when another hype starts, people will want to get their hands on the assets
- blockchains are borderless by design
- "tough" regulation pushes firms outside of jurisdictions
- no regulation can prevent the bankruptcy of an offshore entity
- jurisdictional battles among regulators have to end
- willing issuers need clear guidance
What is blockchain=crypto? Some basic facts
anyone can use it
an open, general-purpose
digital value management tool that maintains digital scarcity
ownership & control is direct and not intermediated
it's a protocol, not a thing
it does not belong to anyone
practically impossible to prevent the creation of code
borderless and digital
does not require high tech, a laptop is enough
requires use of tokens
What is blockchain=crypto? Some basic facts
anyone can use it
an open, general-purpose
digital value management tool that maintains digital scarcity
ownership & control is direct and not intermediated
it's a protocol, not a thing
it does not belong to anyone
practically impossible to prevent the creation of code
borderless and digital
does not require high tech, a laptop is enough
requires use of tokens
The Investment Process
issuers
investors
- funding
- record-keeping
- instruments
- custody
- advice
- trading
services
needed & provided
- takes care of custody and allows self-custody
- allows instrument creation
- enables record-keeping
- allows circumvention of existing institutions
A general purpose value management infrastructure:
intermediaries
separate institutions
- asset custodians
- broker-dealers
- trading platforms
The blockchain reality:
new institutions
emerged that do all three
tokens are often not intended to be investments!
The Regulator's Dilemma
benign
crypto-assets
non-benign crypto-assets or crypto-assets that look like securities but are unregistered
crypto-assets that look like securities and are registered
crypto-assets that regulators feel comfortable to be traded on a platform under their supervision
The Reality of Markets
benign
crypto-assets
non-benign crypto-assets or crypto-assets that look like securities but are unregistered
crypto-assets that look like securities and are registered
crypto-assets that regulators feel comfortable to be traded on a platform under their supervision
Regulator's Dilemma
save custody onshore and save assets only
unsave custody offshore and unsave assets
save custody onshore and unsafe assets
???
Given what people do, what is the bigger evil?