How has your legal background helped you navigate the Blockchain and cryptocurrency space?
I was a lawyer with a lot of Wall Street clients (I did M&A, fund formation, capital markets and regulatory work), which gave me a solid understanding of the potential regulatory challenges that the Blockchain /cryptocurrency ecosystem will face along the road of adoption.
Companies in this space face a lot of regulatory risk (in addition to the typical execution and technical development risk that any entrepreneur in early-stage tech faces). A lot of the entrepreneurs and developers have a "ask forgiveness not permission" attitude and I think many in this space thought they could innovate around financial regulation, but it will not happen as quickly as some may have thought; the interaction between the industry and the regulators is bound to be a rocky road. Eventually the regulators will have to update the existing regulatory paradigm to contemplate decentralized, programmable money and smart contracts.
How has the regulatory space changed since the emergence of new cryptocurrencies and what type of changes in regulations do you predict may occur in the future?
We have hints from the regulators on how they are approaching this industry, but very little that's definitive yet. We know from comments and actions by the SEC that some cryptocurrencies may be considered a security and that some would be considered a "utility" (and some can be both, depending on whether they are currently used in a live product) and therefore outside of their regulatory purview, but we have not had sufficient law case to know how this would apply to a lot of the live cryptocurrencies.
The Libra project is going to test all of the regulators and will hopefully bring some clarity because it is a high profile project. Overall, the lack of regulatory clarity is damaging to the space. All of the companies with any users or traction are spending a lot of time and money dealing with regulators and are unsure of how their roadmaps or businesses may be affected by regulators interpretation of existing laws or future regulation.
In your opinion, is the US lagging behind in regulatory advancement within the cryptocurrency sector? What country is leading the newest trends within the space and why do you think they are doing so successfully?
I think the regulatory uncertainty is pushing innovation offshore. Asia has traditionally been the most active in terms of the penetration of cryptocurrency into the mainstream. The cryptocurrency exchanges with the largest volumes are all offshore. The cryptocurrency space is much more international than the traditional tech sector, which still sees a majority of the innovation coming from Silicon Valley.
Do you think the digital currency space has been over saturated with too many options? How are you able to navigate the space and keep up with the latest trends?
Yes - there are only a few cryptocurrencies with meaningful networks and a clear value proposition. I think bitcoin is the most interesting. It's the largest network, it is the best performing asset of the decade (vs. stocks, real estate etc.) and in my opinion is the only crypto asset that has proven utility (as a store of value).
Ethereum is also interesting because of the strength of the developer network and the potential to be a decentralized computing platform if they can solve the scaling issues. There are a lot of other cryptocurrencies that either do not have any usage or it’s unclear why they are necessary so as far as I can tell people are just holding them to speculate. The best way to learn and stay up on trends is to listen to podcasts (Off the Chain is a great one) and read up on the space.
How do you think the digital asset space will be affected by this looming recession?
Cryptocurrency is uncorrelated to all other assets right now and therefore cryptos are often performing well when the markets are down. A lot of people that believe in bitcoin are also investing in it as a hedge to the current financial system. Since we are in a time of loose monetary policy, inflation and a flight to safe assets, bitcoin may see a boost (similar to gold).
What inspired you to launch a crypto hedge fund MAB Capital?
We are still in the very early stages of adoption for cryptocurrencies, but if the promise of the "internet of value" (the concept of value being streamed quickly peer to peer, much like data is currently transferred on the internet) is achieved and we see mainstream adoptions, I think most of the value that is created is going to be in the underlying cryptocurrency asset and not on any applications that are built on top of it (this is the opposite of the internet, where the applications running on the web are the most valuable).
Owning bitcoin or ethereum or one of the other major crypto assets could be like owning shares in Amazon 10 years ago. There are a lot of investors that are taking a "buy and hold" approach. While I believe in the long term value of the asset class, there is a lot of money to be made in trading these assets and applying sophisticated trading and hedge fund strategies to this new, exciting and developing market.
Reach out to Marissa on LinkedIn.
*Nothing herein constitutes investment advice.