Caitlin Long: Crypto Will Split Into Three Camps Due To Regulation

For years, everyone working in the crypto industry in the United States knew that more industry regulation was coming. But over the past year, this inevitability has become more evident and manifest. Gary Gensler was sworn in as Chairman of the Securities and Exchange Commission in April 2021 and soon began making comments that put crypto advocates on high alert; its SEC in October approved a Bitcoin futures ETF but firmly refused to authorize any spot ETFs; and last month, President Joe Biden issued an Executive Order on Crypto that amounted to a call to action for multiple agencies to get on the same page to regulate crypto.

And yet, as Caitlin Long, veteran Wall Street banker turned crypto startup founder, puts it, “There are a number of people in the crypto industry who don’t want regulation at all.”

Whether they like it or not, it’s coming. And the new regulatory rules will result in a “divided into three camps” in the crypto industry, predicted Long in the latest episode of Decryptthe gm podcast. Here are the three camps as Long described them:

1. “The camp that just doesn’t want regulation at all, very committed to DeFi, very interested in voluntary associations and voluntary means by which disputes are settled, no middlemen. This is the “code is speech” group. And they definitely are going to make progress, they already have. And I think just like you can’t ban Bitcoin, you can’t ban those kinds of structures.

2. “Those who want to be regulated in order to access high-value traditional markets.”

3. “A small group of us, including Custodia, who have been trying to do this for nearly two years and got the Heisman of the regulatory process, so to speak.”

Long’s company, Custodia Bank (formerly known as Avanti Financial), plans to offer banking services to crypto startups that have been snubbed by big banks. She predicts that the first camp of people – those who want no crypto regulation (probably a pipe dream at this point) – will “stay in a niche.”

Its second camp includes the many Wall Street traders and hedge fund titans who have changed their minds about crypto during the pandemic, now openly allocating a small percentage of their portfolio to Bitcoin and Ethereum. Many of them welcome more regulation so that crypto investing has safeguards in place and appeals to traditional retail investors – although that is also the case for a Bitcoin spot ETF, and the SEC has refused to comment. ‘to allow.

As for the third camp, in which Long places herself and others who have tried to play nice with regulators while building crypto businesses, those folks have had widely varying levels of success. Centralized companies like Coinbase have mostly complied with federal requirements, often to criticism from anti-regulatory crypto die-hards.

Long points out that the deposit capacity available to crypto companies with regulated banks remains tiny (it estimates $80 billion) compared to the size of the entire industry ($2.15 trillion in market capitalization as of Sunday). ), which is the gap that Custodia aims to help fill.

“It’s really unbalanced,” she said. “We went through a wave of unbenchmarking – it seems like every four years you go through a wave of unbenchmarking – and we’re going through it again, I hear anecdotes. And in fact, if you take federal bank regulators at their word, we’ve seen speeches from two of the three federal banking agencies talking about cracking down on so-called bank-as-a-service or charter-lease agreements. that is exactly what is happening. And so I think there’s another wave of unbanking happening in our industry, and Custodia can’t be opened up fast enough.

Listen to the full gm podcast episode wherever you get your podcasts and be sure to subscribe.

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Caitlin Long: Crypto Will Split Into Three Camps Due To Regulation


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