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In an industry on the cutting edge of rapidly evolving technology and regulations, it’s no secret that companies need to be more careful when making product statements.
This is especially true when consumers are tricked into believing they are being given more certainty and protection than they actually are. We witnessed a rare regulatory intervention in cryptocurrencies when the Federal Deposit Insurance Corporation (FDIC) recently issued a cease and desist order to FTX for false and misleading statements.
And FTX had its best year yet. The exchange has seen his earnings surge by 1000% in 2021. It is possible (although not clear) that the customer was acquired as a result of the implication that the user’s funds were protected by his FDIC insurance.
The biggest weapon in this case is a now-deleted tweet from FTX President Brett Harrison. he wrote:
He continued:
“Stocks are held in FDIC Insurance and SIPC Insurance Brokerage Accounts.”
FTX executives have never implied that the exchange has FDIC insurance, and in fact said, “We never said that. [the] website”.
Lazy messaging is almost unacceptable in an industry rife with malice and lack of regulatory controls. In cryptocurrencies, companies operate on the cutting edge and cannot trick consumers into believing they are safer than they actually are.
A slight bump in the road of FTX and very relevant is the case of Celsius, whose terms and conditions inherently contradicted to some extent the public messaging and terminology used on its website. For example, terms like user balance and deposit are for descriptive purposes only.
It can ruin lives. Real-world harm especially affects people when the platform lies. Celsius has been accused of paying early depositors with money from new users, leaving 1.7 million customers suddenly stranded in a rush to get their money back with little hope of success.
The big players in this space cannot expect the market to continue to show blind faith. They will increasingly demand better from both companies and regulators. Not only are markets becoming more sensitive to unsubstantiated promises, but regulators are taking notice as well, and cryptocurrency companies have been unable to escape spreading the truth these days.
Over the past five years, several high-profile projects in the blockchain space have raised hundreds of millions, sometimes billions, of dollars from “retail users,” all of which have failed to reach their full potential. Regardless, it offered founders huge entrepreneurial rewards. The recent wave of bankruptcies, liquidations and bankruptcies has effectively created a new generation of bullish survivors who are here to evaluate and educate the next generation of projects and users.
We are beyond the point where we can expect companies and start-ups to self-regulate a culture of transparency around their projects. If it doesn’t serve their financial goals, why should they?
But arguably, blockchain is still in its infancy as blockchain technology matures. Both consumers and legislators have grown accustomed to identifying what constitutes credible projects led by competent teams, which will lead to increased regulatory control.
Regulators have realized that while the statements FTX is making are correct, they are likely to mislead some users.simply work Transactions with FDIC-insured banks do not allow the inadvertent implication that the exchange itself is covered.
Trust goes a long way when discussing unrealized or nascent technologies. It becomes even more important when this technology can become a host of savings for an entire life.
As the reality of cryptocurrencies is yet to be constructed, we expect a loss of signal between vision and technical truth. Do not allow room for selfish ambiguity or promises that are not kept and backed by a set of terms.
If the industry fails to self-regulate to the extent necessary, regulators could take a fine-tooth comb and completely change the way blockchain projects operate. The power to stop cryptocurrencies from appearing to mainstream audiences like the frontiers of the Wild West now lies with those building in this space.
Founder and CEO of Chains.com. Anderson McCutcheon is building a full-stack crypto economy consisting of marketplaces, freelance platforms and cryptocurrency exchanges. Anderson is also an investor and entrepreneur with a multidisciplinary technical and marketing background with a long history in the cryptocurrency space. A blockchain industry pioneer and 8200 alumnus, he founded Unicoin, Synereo (later he became HyperSpace) and now Chains.com and he leads the Nemesis Capital litigation fund.
