SEC chief Gary Gensler says crypto will only become mainstream if clear rules are in place, as he plans tighter regulation

Gary Gensler SEC Chair Securities and Exchange Commission
Gary Gensler became chair of the SEC in April.

  • SEC Chair Gary Gensler said crypto will only take off if there are clear rules around the market.
  • He said investors need more protection from fraud and suggested he wants to focus on crypto exchanges.
  • Gensler said the SEC is looking at at least seven crypto areas including DeFi, stablecoins and ETFs.
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New Securities and Exchange Commission chief Gary Gensler has said crypto can only become mainstream if regulators lay out clear rules – as he sets his sights on stricter regulation for the $1.6 trillion digital asset market.

In a wide-ranging interview with Bloomberg, Gensler said he believes investors need more protection against fraud. He also said the SEC is looking at at least seven areas of the market, including decentralized finance and stablecoins. And he again suggested he wants to focus on crypto exchanges in particular.

Gensler, who taught a cryptocurrency course at MIT, said he’s neutral or even intrigued by the technology, but is not neutral about investor protection. “We have a role as a nation to protect those investors against fraud,” he said in the interview, published Tuesday.

Gensler said he believes digital assets can boost economic progress and become more widely used, according to Bloomberg.

But he said: “It’s only with bringing things inside – and sort of clearly within our public policy goals – that a technology has a chance of broader adoption.” Gensler said it was a bit like driving, which only took off when the government laid out clear rules of the road.

Read more: The founder and CEO of crypto exchange FalconX breaks down 3 reasons DeFi is here to stay – and shares 5 cryptocurrencies institutional clients are most interested in at the moment

The former Goldman Sachs partner said the SEC is doing lots of work on digital assets and looking at at least seven key issues: initial coin offerings, trading venues, lending platforms, decentralized finance or DeFi, stablecoins, custody, and exchange-traded funds.

Gensler told Bloomberg he thinks regulating crypto exchanges could be the best way to gain more control over cryptocurrencies. In May, he urged Congress to work on legislation to give the SEC more oversight of trading venues.

A key issue when it comes to crypto regulation is whose jurisdiction the sector falls under. Regulators broadly think bitcoin is more like a commodity than a security, likely putting the biggest cryptocurrency outside the SEC’s remit.

But Gensler said DeFi lending could come under SEC oversight as it often offers a specific interest-rate return. He also said platforms that pool digital assets could be akin to mutual funds, meaning the SEC could regulate them.

However, Gensler did not lay out when the SEC will take further action on crypto, saying other big issues such as the GameStop saga were occupying the markets watchdog. He also declined to say whether the SEC would approve a bitcoin ETF.

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Billionaire investor Mike Novogratz attacks Elizabeth Warren’s anti-crypto stance, saying DeFi is far more transparent than banks

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Mike Novogratz is one of the most high-profile bitcoin and crypto investors.

Billionaire investor Mike Novogratz has criticized Senator Elizabeth Warren’s anti-crypto stance, saying decentralized finance, or DeFi, can be a progressive force that is more transparent for consumers than banks.

Warren on Tuesday sent a letter to Treasury Secretary Janet Yellen calling for tougher rules on cryptocurrencies and related industries. The senator is concerned that retail investors are getting hurt in a volatile and unregulated market.

But Novogratz tweeted to Warren on Tuesday night: “You really don’t seem so progressive to me.”

The famed crypto investor said: “Banks charged $12 billion in overdraft fees, a fortune in ATM fees, a fortune in checking account fees. But you keep going after crypto where saving and money transfer is a fraction of banks.”

He added: “If banks had the transparency of DeFi protocols, we would not have had the mortgage crisis. DeFi will win because it’s better. [Automatic] settlement. Bearer assets. Composability. Transparency.

“We just need to solve for KYC [know-your-customer protections] which is coming. We need to educate our politicians.”

Read more: The cofounder of the cryptocurrency Tezos explains why DeFi yield farming is doomed to fail – and breaks down the role she thinks digital assets will play in society moving forward

DeFi is a catch-all term for financial products built using blockchain technology that do not require a central authority, such as interest-bearing accounts and exchanges that do not need banks, or clearing houses.

Estimates of the size of the market vary, but CoinGecko reckons the market capitalization of the top 100 coins used in the DeFi world is more than $80 billion.

Warren included DeFi on her list of “growing threats” that crypto poses to consumers. She is among the lawmakers and regulators concerned that DeFi’s lack of centralized authorities mean amateur investors have next to no protections and could get badly burned.

The senator said to Yellen that the Financial Stability Oversight Council must “act quickly to use its statutory authority to address cryptocurrencies’ risks and regulate the market to ensure the safety and stability of consumers and our financial system.”

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Binance is on the hunt for a CEO with regulatory and compliance skills, but Changpeng Zhao says he’s not being replaced any time soon

Changpeng Zhao
Binance CEO, Changpeng Zhao.

Binance CEO Changpeng Zhao said he’s open to stepping down from his leadership role in favor of a compliance expert, as the crypto exchange seeks to cooperate better with global regulators.

Zhao stressed that he isn’t making the move right away and that the company’s search for a CEO with compliance and regulatory skills didn’t mean he was being replaced immediately. “But I view this as a very important progression of our next pivot,” he said at a virtual press conference on Tuesday.

Binance, one of the world’s biggest crypto exchanges, vowed to make changes after a series of financial authorities around the world banned its operations for failing to register with local regulators. In the US, it has been subjected to investigation by the Justice Department and the Internal Revenue Service over concerns about illegal transactions.

The company now plans to double the size of its global compliance team by the end of 2021.

With this in view, Zhao said the hunt is on for a compliance expert as leader and that he would be able to help drive the company even after letting go of the role.

“If there is a suitable candidate that has a strong regulatory background that can lead an international business like Binance, I’ll be very happy for that person to take the CEO role, so that this shows our commitment to regulatory compliance,” he said.

“I will always contribute to Binance and the BNB ecosystem. I don’t have to be CEO to do that.”

Zhao, the founder of Binance, has been the company’s CEO since its establishment in 2017. With a net worth of almost $2 billion, he is the fifth-richest on Forbes’ list of crypto billionaires.

In a series of tweets later Tuesday, Zhao clarified what succession-planning means to him. He said CEOs should ideally stay in their roles for not more than five years, and suggested bringing a fresh approach helps businesses stay on top of developments.

“We live in a dynamic world. We need new thinking. Presidents only serve for 4 years,” he tweeted.

Read More: The founder of crypto-trading platform Apifiny breaks down why bitcoin is set to ‘easily’ rally back to $60,000 by the end of the year – and could eventually hit $100,000

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Hong Kong police arrest four over alleged $155 million Tether money laundering scheme

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Regulators are paying close attention to the crypto world.

  • Hong Kong authorities arrested four men over an alleged $155 million money laundering scheme, according to reports.
  • The men, aged between 24 and 33, had made transactions in Tether on a trading platform, officials said.
  • Cryptocurrencies have long been used in crime, as they can provide anonymity and be hard to trace.
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Hong Kong customs authorities have arrested four people in connection with a suspected $155 million money laundering scheme using the cryptocurrency Tether.

According to reports in Bloomberg and local media, four men aged between 24 and 33 were arrested in an operation called “Coin Breaker.”

Hong Kong customs officials told the media that the men had opened various bank accounts and then made transactions in Tether – the biggest stablecoin – through a crypto exchange, outlets reported. The transactions involved HK$1.2 billion of cryptocurrency, worth roughly $155 million.

The officials said it was the first time they had detected a suspected money laundering scheme that used digital currency. They did not name the crypto trading platform involved. Insider has contacted the Hong Kong customs office.

Read more: Your ultimate crypto reading list: 27 books that experts say everyone should read to better understand digital currencies and invest in them profitably

Cryptocurrencies have long been used in crime, thanks to the fact that they can be used anonymously and are hard to trace.

On Friday, the US District Court in Seattle said a 33-year old identity thief who used bitcoin to avoid detection was sentenced to three years in prison.

And on Tuesday, London’s Metropolitan Police said it had seized $249 million worth of cryptocurrency in a suspected money laundering case.

Top lawmakers have repeatedly raised concerns about crypto crime. US Treasury Secretary Janet Yellen in January suggested “curtailing” cryptocurrencies saying: “Many are used – at least in a transaction sense – mainly for illicit financing.”

In Hong Kong, as in the UK, crypto companies have to register with the financial watchdog for anti-money laundering purposes.

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Santander UK joins Barclays in blocking payments to Binance after regulator clamps down on the crypto exchange

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Binance CEO, Changpeng Zhao.

  • Santander’s UK unit has joined Barclays in blocking customer payments to crypto exchange Binance.
  • The FCA, the UK financial watchdog, has banned Binance from trading regulated derivatives.
  • A series of countries have been cracking down on the crypto exchange, including Poland and Japan.
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Santander UK has joined rival banks Barclays and NatWest in stopping its customers from making payments to Binance after the national regulator said the cryptocurrency exchange was not allowed to trade regulated derivatives.

In a customer update sent via email on Thursday, Santander told its UK clients the bank would block payments to Binance for their client safety and protection. Customers could however still receive funds from Binance.

“We’re taking this step as we want to do everything we can to protect you and keep your money safe.” the email said.

The bank cited the FCA’s statement warning consumers about Binance and said they were making the change to protect customers from fraud.

“In recent months, we have seen a large increase in UK customers becoming the victims of cryptocurrency fraud. Keeping our customers safe is a top priority, so we have decided to prevent payments to Binance following the FCA’s warning to consumers.” Santander’s UK customer service account added via Twitter in response to a complaint about the ban.

Santander’s customers had taken to the social media platform to protest the ban and suggest they would close their accounts with the bank unless it reversed its decision

The Financial Conduct Authority told Binance in late June it had to halt regulated activities unless it obtained prior written permission from the regulator. The FCA effectively banned the crypto exchange’s UK-listed entity, Binance Markets, from offering crypto derivatives.

A series of UK-based financial institutions have since stopped their customers from making payments to the crypto exchange platform, among them Barclays and NatWest, which are some of the biggest retail banks in the country.

Binance’s main exchange is not UK-based, so people in the country who buy and sell cryptocurrencies via its platform will not be affected by the ban, the crypto exchange provider said at the time of the ban.

Binance has been in the hot seat in various countries now – most recently the Polish regulator urged caution, while Thailand’s Securities and Exchange Commission filed a criminal complaint against the company for unlicensed operating.

Japan’s regulator had also issued a warning about Binance operating in the country despite not having obtained a license to do so and the crypto exchange risks being fined in Germany for offering digital tokens that track securities without presenting an investor prospectus, according to Reuters.

On Wednesday, the day before Santander’s announcement, Binance’s CEO Changpeng Zhao wrote a blog post addressing the regulatory crackdown. He said he welcomed regulation as it helped the industry grow and that Binance was focused on its customers best interests.

“Compliance is a journey – especially in new sectors like crypto. […] Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day. We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users.” he wrote.

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Elizabeth Warren demands answers from the SEC on crypto regulation by the end of July

senator elizabeth warren
  • In a letter addressed to the chairman of the SEC, Senator Elizabeth Warren demanded answers on crypto regulation by July 28.
  • Warren, who’s part of the Senate Banking Committee, is concerned about risks to consumers and investors from the $1.3 trillion market.
  • She said Congress may need to act to ensure the SEC has proper authority to close existing regulation gaps.
  • See more stories on Insider’s business page.

In a Wednesday letter addressed to SEC Chairman Gary Gensler, Sen. Elizabeth Warren demanded the agency answer a series of questions related to cryptocurrency regulation – and said she expects an answer no later than July 28.

The Massachusetts Democrat – who serves as chair of the Senate Banking Committee’s Subcommittee on Economic Policy – laid out her goal of protecting investors in the expanding market for digital currencies.

“The increased use of cryptocurrency exchanges presents unique risks to consumers,” Warren said in the letter. “Although they describe themselves as cryptocurrency ‘exchanges,’ these platforms lack the same types of basic regulatory protections as traditional national securities exchanges like the New York Stock Exchange or Nasdaq.”

Warren said the information she’s requested will help Congress determine if it needs to act to ensure the SEC has the needed authority to close existing gaps in regulation. Those gaps, she said, leave investors and consumers vulnerable to dangers in what she called a highly opaque and volatile market.

Warren also said in her letter that nearly 7,000 people in the US reported losses of $80 million from cryptocurrency scams between October 2020 and March 2021.

“The harms to consumers as a result of this under-regulated market are real and continue to proliferate in the absence of effective SEC regulations,” she said.

Warren presented five questions to the SEC, beginning with:

  1. “Do you believe that cryptocurrency exchanges are currently operating in a ‘fair, orderly, and efficient’ manner? If not, what problems has the SEC identified that are associated with the use of these exchanges?”

The cryptocurrency market this year has notched a number of milestones including exceeding a valuation of $2 trillion in April as bitcoin topped a $1 trillion market value . Those moves were made alongside the trading debut of Coinbase, the largest crypto exchange in the US. Wall Street banks and other institutions have ramped up their business exposure to the market. Meanwhile, the SEC is considering the application of 13 bitcoin ETFs.

But the cryptocurrency market’s valuation has since fallen to roughly $1.4 trillion because of a sell-off in bitcoin, ether, and other digital currencies.

Read more: A crypto evangelist shares 5 altcoins that could explode in value, including one with 100-times potential – and breaks down his 3-part strategy for betting on speculative but potentially rewarding tokens

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Crypto exchange Binance plans to double the size of its global compliance team as regulators turn up the heat

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Binance CEO, Changpeng Zhao.

  • Binance plans to give its global compliance team a two-fold boost by the end of 2021.
  • “We plan to double our team size by the end of the year,” CEO Changpeng Zhao said on Tuesday.
  • Legal pressure has begun mounting on Binance, making it unable to operate smoothly in some regions around the world.
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Binance plans to double the size of its global compliance team by the end of 2021 as the industry faces “a lot of uncertainty,” CEO Changpeng Zhao said in an open letter on Tuesday.

Zhao said the company’s international compliance team and advisory board has already grown by 500% since last year.

Former Financial Action Task Force executive secretary Rick McDonell, former head of the Canadian delegation to the FATF Josée Nadeau, and former US Ambassador to China Max Baucus are among the high-profile appointments on the team.

“We plan to double our team size by the end of the year, with qualified and experienced advisors to support,” Zhao said in his letter.

Binance has been under fire over a series of regulatory threats. Pressure first began mounting from Ontario, Canada, where a regulator alleged that the company failed to comply with securities laws.

Then the UK’s Financial Conduct Authority banned Binance’s local subsidiary, ordering it to stop all regulated activity in the country. The Cayman Islands too, where Binance was incorporated in 2017, said the exchange isn’t authorized to operate crypto trading in the nation. Officials in Thailand also filed a criminal complaint against the exchange last week for operating without a license.

Soon after, UK bank Barclays blocked customers from making card payments to Binance, saying this was done to help keep customers’ money safe.

In an email to users on Tuesday, Binance said it would suspend euro bank deposits from a key European payment network (the Single Euro Payments Area) due to “events beyond our control.” It described the suspension as temporary, according to the Financial Times.

In his letter, CEO Zhao compared crypto adoption to the invention of the car industry to explain that laws and guidelines for road traffic took a while to develop.

“Crypto is similar in the sense that it can be accessible for everyone, but frameworks are required to prevent misuse and bad actors,” he said.

“Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day.”

A fresh wave of regulatory clampdowns has set off panic investor behavior and willingness to sell at a loss, bringing cryptocurrency prices down from their peaks earlier this year. Bitcoin was last trading at $34,824 on Wednesday, down around 0.2% on the day. It’s still up 21% so far this year, but has lost 45% since hitting a record in April. Ripple’s XRP fell 1% to 67 cents on Wednesday, while litecoin fell 0.4% to $141.60.

Read More: Goldman Sachs names 30 stocks to buy for double-digit revenue growth in 2022 – and 4 sectors expected to beat the S&P 500’s sales growth

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Crackdowns by regulators could pop the crypto bubble and mean bitcoin is unsuitable for professional investors, says UBS

China bitcoin mining crackdown Chinese flag cryptocurrencies
China is increasingly cracking down on bitcoin.

  • Crackdowns by regulators make bitcoin unsuitable for pro investors and could pop the bubble, UBS said.
  • The bank pointed to China clamping down on mining, and the growing concern over crypto in the UK and US.
  • It also said the common practice of trading crypto with leverage is likely to draw regulators’ attention.
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Regulatory crackdowns could pop bubble-like crypto markets and mean bitcoin is unsuitable for professional investors, Swiss banking giant UBS has warned its clients.

In a note sent out last week, UBS’ global wealth management team said China’s latest crackdown had hurt crypto prices and operators. It also said there were signs that tougher rules could be in the pipeline in Western markets such as the US and UK.

“Regulators have demonstrated they can and will crack down on crypto,” the note read. “So we suggest investors stay clear, and build their portfolio around less risky assets.”

It added: “We’ve long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets.”

Read more: The top US portfolio manager at $2 trillion Amundi explains why bitcoin and ether won’t play a bigger role in the financial system in 10 years than they do now – and says a regulatory storm is coming for crypto

UBS’ warning to clients said a number of recent regulatory developments were a concern for cryptocurrencies.

China renewed its restrictions on the computing process known as cryptocurrency “mining” in June, with authorities in Sichuan province closing down numerous sites.

In the US, Boston Federal Reserve’s president Eric Rosengren said stablecoin Tether was one of the “financial stability challenges” it is watching. And the UK’s Financial Conduct Authority banned crypto exchange Binance from operating in the country.

UBS’s note added: “Crypto trading practices, such as extending 50X or 100X leverage, appear fundamentally at odds with mainstream finance regulation.”

The Swiss bank’s concern about cryptocurrencies is shared by many other lenders. Goldman Sachs analysts in May said bitcoin is “not a suitable investment” and listed concerns about its volatility and lack of cash flow.

However, Wall Street is divided on cryptocurrencies – as are banks themselves. Goldman Sachs, for example, relaunched its crypto trading desk this year to take advantage of the crypto boom, in spite of its reservations.

UBS said in its note: “While we can’t rule out future price gains in cryptos, we see this as a speculative market that poses significant risks to professional investors.”

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Courts should be able to reverse crypto transactions and unmask the people behind them, US congressman says

Rep. Bill Foster
US Representative, Bill Foster.

  • US courts should be able to reverse crypto transactions, US Rep. Bill Foster said in an Axios interview.
  • Until the crypto industry can manage ransomware attacks, anonymity will be hard to sustain, he said Tuesday.
  • Regulations should hand a ‘backdoor key’ to courts for access to crypto networks, the congressman said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

A court or other trusted third party should be able to reverse cryptocurrency transactions if they are fraudulent or the result of criminal activity, US Rep. Bill Foster said as he called for new regulation in an Axios interview.

The Illinois Democrat, who co-chairs the Congressional Blockchain Caucus, said that until the crypto industry can come up with solutions to deal with crypto-ransomware attacks, anonymity for those involved in transactions would be “very hard to sustain.”

“You would have to be able to go to a court to unmask participants under some circumstances. It does not have to be visible to the whole world, and that may not even be desirable,” Foster said in the interview on Tuesday.

The congressman proposed bringing in a regulatory framework that would provide a “very heavily guarded key of a cryptographic backdoor” to the likes of federal courts, so they could reverse transactions on a blockchain.

The proposals may provoke outcry from crypto fans, keen to keep digital assets free from government control and manipulation, he acknowledged. But Foster said he could think of no better solution.

“Now, I’ve just said about three things there that will drive the crypto purists berserk, like the trusted third party and so on,” he said. “But in fact, there’s not a technological alternative that I’m aware of.”

“For most people, if they’re going to have a big part of their net worth tied up in crypto assets, they’re going to want to have that security blanket of a trusted third party that can solve the problem,” he added.

Colonial Pipeline paid a bitcoin ransom worth about $4.4. million to hackers in May, after its pipeline network was paralyzed in a cyberattack, though US authorities were able to recover the majority of the payment. The major cybersecurity incident forced the closure of one of the most important conduits for fuel supply in the US, causing gasoline shortages in some states.

As a result of that incident, future crypto regulations are likely to explicitly target access to information about individual ownership of accounts, Carlos Betancourt, cofounder and principal at crypto hedge fund BKCoin Capital, told Insider. That will enable law enforcement agencies to track the money flows – just like they do today between banks, he said.

While Foster stressed the US doesn’t want to go down China’s route of heavy surveillance over the crypto space, he does see a need for something to be done to combat criminal usage.

“We’re going to have to establish a wall between the legal and the illegal,” he said.

Read More: A digital-assets investing chief breaks down 10 reasons why the crypto bear market thesis is broken – and lists 10 cryptocurrencies that still have solid fundamentals despite falling by up to 70%

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Tighter regulation will boost cryptocurrencies by tackling ‘unholy’ activity, a finance law professor says

Bitcoin symbol atm
Regulators are paying close attention to the crypto world.

  • Regulation will boost crypto by weeding out “unholy” criminal activity, a law professor has said.
  • Emilios Avgouleas said tougher rules may be bad for crypto prices in the short run, however.
  • China is among the states cracking down on bitcoin, while the US’s SEC is taking a close interest.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Tighter regulation of cryptocurrencies will benefit the industry in the long run by tackling “unholy” criminal activity and making digital tokens more legitimate, a finance law professor has said.

Yet, regulations may hit the value of cryptocurrencies such as bitcoin in the short term, Professor Emilios Avgouleas, chair of international banking law at the University of Edinburgh, told Insider.

“In the short run, regulation may be a bad thing, because market prices will go down,” Avgouleas said. “But at the same time regulation will weed out unholy activity and will make these alternative means of payment even more acceptable for the mainstream user.”

He said he believes that, “in the long run, it will make the shift away from government money, to digital means of payment, permanent.”

Avgouleas, who is also a senior research fellow at crypto technology company IOHK, also said that central banks’ plans to create their own digital currencies should legitimize cryptocurrencies in the eyes of consumers.

Read more: Millennials are adding crypto to their retirement funds, but they could lose it all if the market sours. Two experts break down how to get the returns, but without the risks from digital assets

Regulators around the world are increasingly paying attention to cryptocurrencies, which boomed in the early months of 2021 before tumbling in May and June.

China has already begun a crackdown on bitcoin “mining” and payments. In the US, the new SEC chair Gary Gensler has spoken numerous times about how he feels there are gaps in the rules covering crypto.

Internationally, the world’s top banking regulator has said that financial institutions holding bitcoin or crypto should have to follow tough rules to make sure their exposure doesn’t cause financial instability.

Avgouleas said regulatory efforts should make cryptocurrencies more reputable and make it harder for criminals to use them. He said people want to know they’re transacting with something that’s “ethical and not used by the mafia.” Regulation will solve that, he added.

The recent regulatory crackdown in China has hit bitcoin hard, however, contributing to its tumble from $65,000 in April to half that in June. Chinese authorities have warned banks against facilitating bitcoin payments, presenting a potentially significant barrier to global adoption.

Some doubt that cryptocurrencies, which are often much slower than traditional digital payments, will ever be widely used for transactions. New York University professor Nouriel Roubini has said the Flintstones “had a better monetary system than bitcoin.”

Yet, Avgouleas said he’s bullish about the prospects of cryptocurrencies, believing they could become widely used around the world as they’re private, secure and international.

Avgouleas is unsure which cryptocurrencies may become the most popular in the future. But he said the billions of dollars that have been invested in the crypto world is likely to mean that “what is not fast and scalable today, would be super-fast and super-scalable tomorrow.”

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