More on FTX and the Industry

hi this is Charles hoskinson broadcasting live from warm sunny Colorado always warm Always Sunny sometimes Colorado today is November 11th Veterans Day 11 11. it's very special day I it's a day that means a lot to my staff a lot to me and I figured I'd make a video before I go home to talk a little bit about the industry and also the FTX issues as many of FTX has collapsed it's declared bankruptcy and it's going to be unable to honor its obligations I went from a crypto Empire that spanned from Solana and polygon all the way to massari and everything in between to basically a existential threat to the stability of the cryptocurrency ecosystem in about 48 hours now in hindsight in in reflection there were enormous warning signs ranging from the talent that was at FTX to the governance of the company to the fiscal strategy that they followed how they invested their money where they chose to deploy it the statements that they made and reflection they don't look so solid and this is generally what happens when you have regulated businesses that are in a position of trust led by kids who have no experience it's okay to have young entrepreneurs and it's okay to have inexperienced people have great visions and dreams and pursue those things but the first thing that happens when you're a young entrepreneur because I'm still young and I was very young when I entered this industry is that once you're given money you have to bring together a diverse team of people and have that team of people work with you to build something great if you look at IO my CFO has over 35 years of experience on Wall Street he was Chief Operating as an officer at Mizzou he is personally responsible for hundreds of billions of dollars of various Commodities and other things at the trading desk he was on and the regulated financial institutions he was at it's fair experienced guy general counsel is a JD MBA a senior partner at a law firm when he when we hired him I and I went to Wharton went to many places he did the Overstock stock offering for crypto did a lot of stuff and it's one of the domain experts in the merger of traditional law and cryptocurrencies as well as the regulate regulatory intersection within our Circle we have advisors external internal and people that have lifetimes worth of experience on strategy marketing operations and everything in between who have been accountable for billions of dollars we're not a regulated business we're just a cryptocurrency protocol developer you need this plus plus if you look to things a exchange or a trading desk or something where you have a fiduciary responsibility for other people's money it's axiomatic and it's the first thing you do as an entrepreneur now the absence of this doesn't necessarily mean that you're going to fail or not be able to survive you can certainly find ways to rise to occasion but it's definitely true that on average if you need surgery it's probably a pretty good idea to go to a qualified surgeon instead of somebody who stayed at a holiday in express and too much of this has happened in the industry whether we look at Celsius whether we look at Mount gox and the qualified people there or lack thereof we look at any of these institutions that have failed generally speaking when you look at it it's a people procedure and process problem as much as it is a flawed business idea standards regulation and oversight do tend to help from the perspective of forcing you either through soft power like sros and memberships and hard power through explicit regulation in getting at least to that statement of safety it is important to point out that this was not an unregulated business and there's been enormous amounts of discussion about well how should cryptocurrency react look at the unregulated cryptocurrency this is frankly a centralized business failing Bitcoin was not hacked ethereum was not hacked cardano was not hacked none of the big chains were hacked crypto didn't fail people failed people in positions of trust at the end of the day as much as we like to believe in the principles of cryptocurrency this had everything to do with people putting their money in centralized exchanges and organizations entrusting centralized businesses to do something on their behalf that's the very industry we're trying to get rid of with the cryptocurrency space unfortunately it's going to now be conflated and there's a very high possibility that the Fallout of this will be new legislation hopefully decent legislation but there's a strong possibility that it won't be as members of this industry we're just going to have to live with it and we're gonna have to figure out ways to integrate and deal with it but this is unfortunately the consequence when you have people who don't know what they're doing get into positions of power and trust and create cascading and catastrophic damage this is just the tip of the iceberg if you look at the financial relationships that FTX had as we go down the list it could create a Cascade of insolvencies and unfortunately crypto doesn't get a bailout our competitors do Trad fire lives with that every day they'd already be calling up their buddies in government saying how big of a check can we haggle over with crypto we don't get that we just get the privilege of cleaning up the mess and then being blamed for it and having to deal with the financial outcome ourselves now I do believe this is not going to kill cryptocurrency I do believe that our industry will be much stronger in the future and I do believe that our best days are still ahead of us this said I do believe that unlike Mount gox unlike Celsius unlike Luna and past events FTX does have the unique property that it could end up being the straw that breaks the camel's back and changes at least in the short to mid term how cryptocurrencies work in America in particular changes the appetite lawmakers have for giving the industry a pro-growth freedom mandate we could look at a world where non-custodial wallets are no longer permitted in the United States we could look at a world where every cryptocurrency except for Bitcoin is labeled as security and forced to comply with onerous regulations which will rob them of liquidity and not provide any consumer protections or investor protections if you believe that they do I will remind you that a huge amount of tech stocks are down 90 percent this year and I will remind you that Bernie Madoff ran a regulated entity so don't believe for a moment that additional regulation if blindly applied is going to solve any particular problem for the industry but now that is a possibility it is also a possibility that we could see a mass consolidation of the regulated infrastructure in this industry towards the hands of just a few players who will then form an oligarchy which is not possible to displace and will basically end the American cryptocurrency marketplaces we used to enjoy it now I'm not saying this will happen I'm saying that the probability of these types of things happening is now greater as a direct result of the failure of FTX the reason being is that unlike Celsius and Luna the principles that FTX had a direct relationship with many politicians in Washington D.