Disentangling the Crypto Crash of 2022

A reckoning in the digital asset industry that started in June after the collapse of improperly collateralized investment assets gained new urgency in November. Following the professional and possibly legal improprieties that led to bankruptcy and chaos at the FTX cryptocurrency exchange, the industry is regrouping and putting distance between legitimate market participants and the grifters.

In June, I attended Crypto Connection 2022 and in September Digital Asset Summit 2022 New York and the Trading Show 2022 Chicago. Speakers and exhibitors at these shows serve the needs of institutional investors, including hedge funds, private equity groups, family offices, pension funds, and endowments. Narratives that emerged over the summer:

• differentiated cryptocurrency and blockchain technology,
• indicated that the bad actors failed,
• called for increased regulatory clarity,
• focused on protocols that worked, and
• pointed toward future innovation in digital assets.

Industry leaders, especially those seeking institutional legitimacy, are calling on market participants and regulators to set and comply with principles of sound financial management. I expect that U.S. regulators and Congress will redouble their efforts. They also received their share of criticism over the summer for not providing the digital asset industry with the rules of the new road.

Marketers face their own challenges. My technical communications firm will make the distinction between cryptocurrencies and digital-asset technologies clearer and more accurate. Meanwhile, digital asset innovation continues with a focus on blockchain technology, central bank digital currencies, and decentralized finance protocols.

Blockchain is not crypto.

It’s commonly assumed that digital assets, blockchain technologies, and cryptocurrencies are one and the same. Marketers of systems, products, and investments that rely on blockchain technologies routinely explain that their products are not bitcoin, are not ether, are not meme coins, are not scams. Fairly or not, crypto has a dodgy reputation and has from the start.

Simply put, cryptocurrencies exchange value and have grown into a tradable asset class. Blockchain technologies manage data about value and mark its changes in its ownership.

The underlying blockchain technologies are expected to make it more timely, secure, and certain to record who owns what and show how ownership is transferred using public and private networks. One notable use case is the representation of physical assets and commodities by digital code or tokens so that the assets can more easily be traded in smaller amounts to a wider range of investors.

“Blockchain will revolutionize trade settlement and payments reconciliation. It’s here to stay and already proven as a means of transferring ownership for assets,” said Chris Giancarlo, former chairman of the U.S. Commodities Futures Trading Commission (CFTC) and author of CryptoDad: The Fight for the Future of Money. He spoke at Crypto Connection.

This overview of the Crypto Crash of 2022 and the industry’s current state is written for interested but not crypto-obsessed financial professionals.

The primary idea here is to gain “operational efficiencies through a mutualized workflow,” as Arijit Das put it. He heads digital asset technology at the Northern Trust Company and spoke at the Trading Show Chicago 2022. “It’s the standardization of data and workflows that are the main problem we’re solving, not the technology. That’s where digital assets are reinventing part of the traditional financial world and workflow.”

Companies are pointing out their blockchain credentials over their crypto credentials. “Our focus is on blockchain, not crypto,” said Neil Chopra, director of business solutions and strategy at Fireblocks, a provider of secure digital asset infrastructure for institutions, at Crypto Connection. “We are taking what people are doing today and mapping it to blockchain.”

Underscoring differentiation between crypto and blockchain since the summer, the digital-assets payments firm Circle started running the advertising campaign “Benjamin Meet Blockchain” in mid-October 2022. I love it and used photographs of its street ads in Chicago to illustrate this article, another in a series of posts I have published on payments and cryptocurrency advertising.

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Disentangling the Crypto Crash of 2022

Disentangling the Crypto Crash of 2022

 FinTechRising  November 18, 2022

A reckoning in the digital asset industry that started in June after the collapse of improperly collateralized investment assets gained new urgency in November. Following the professional and possibly legal improprieties that led to bankruptcy and chaos at the FTX cryptocurrency exchange, the industry is regrouping and putting distance between legitimate market participants and the grifters.

In June, I attended Crypto Connection 2022 and in September Digital Asset Summit 2022 New York and the Trading Show 2022 Chicago. Speakers and exhibitors at these shows serve the needs of institutional investors, including hedge funds, private equity groups, family offices, pension funds, and endowments. Narratives that emerged over the summer:

differentiated cryptocurrency and blockchain technology,

indicated that the bad actors failed,

called for increased regulatory clarity,

focused on protocols that worked, and

pointed toward future innovation in digital assets.

Industry leaders, especially those seeking institutional legitimacy, are calling on market participants and regulators to set and comply with principles of sound financial management. I expect that U.S. regulators and Congress will redouble their efforts. They also received their share of criticism over the summer for not providing the digital asset industry with the rules of the new road.

Marketers face their own challenges. My technical communications firm will make the distinction between cryptocurrencies and digital-asset technologies clearer and more accurate. Meanwhile, digital asset innovation continues with a focus on blockchain technology, central bank digital currencies, and decentralized finance protocols.

This overview of the Crypto Crash of 2022 and the industry’s current state is written for interested but not crypto-obsessed financial professionals.

Blockchain is not crypto.

It’s commonly assumed that digital assets, blockchain technologies, and cryptocurrencies are one and the same. Marketers of systems, products, and investments that rely on blockchain technologies routinely explain that their products are not bitcoin, are not ether, are not meme coins, are not scams. Fairly or not, crypto has a dodgy reputation and has from the start.

Simply put, cryptocurrencies exchange value and have grown into a tradable asset class. Blockchain technologies manage data about value and mark its changes in its ownership.

The underlying blockchain technologies are expected to make it more timely, secure, and certain to record who owns what and show how ownership is transferred using public and private networks. One notable use case is the representation of physical assets and commodities by digital code or tokens so that the assets can more easily be traded in smaller amounts to a wider range of investors.

“Blockchain will revolutionize trade settlement and payments reconciliation. It’s here to stay and already proven as a means of transferring ownership for assets,” said Chris Giancarlo, former chairman of the U.S. Commodities Futures Trading Commission (CFTC) and author of CryptoDad: The Fight for the Future of Money. He spoke at Crypto Connection.

The primary idea here is to gain “operational efficiencies through a mutualized workflow,” as Arijit Das put it. He heads digital asset technology at the Northern Trust Company and spoke at the Trading Show Chicago 2022. “It’s the standardization of data and workflows that are the main problem we’re solving, not the technology. That’s where digital assets are reinventing part of the traditional financial world and workflow.”

Companies are pointing out their blockchain credentials over their crypto credentials. “Our focus is on blockchain, not crypto,” said Neil Chopra, director of business solutions and strategy at Fireblocks, a provider of secure digital asset infrastructure for institutions, at Crypto Connection. “We are taking what people are doing today and mapping it to blockchain.”

Underscoring differentiation between crypto and blockchain since the summer, the digital-assets payments firm Circle started running the advertising campaign “Benjamin Meet Blockchain” in mid-October 2022. I love it and used photographs of its street ads in Chicago to illustrate this article, another in a series of posts I have published on payments and cryptocurrency advertising.

Benjamin Meet Blockchain, Circle’s current ad campaign as seen on the streets of Chicago

Circle issues the USDC stablecoin, which “serves as a digital dollar currency” and is backed one-to-one by U.S. dollars. The firm is committed to “the tokenization of all things,” a reference to the use case of digitally representing physical assets like real estate with digital asset tokens. Stablecoins like USDC provide an immediate means of exchange in trading digital assets, bringing increasing regulatory scrutiny.

I’ve learned about other blockchain-based systems over the years, including BanQu. The platform tracks the provenance of all the materials that go into manufactured goods, whether industrial or agricultural. Brands can trade raw materials, and the farmers and laborers, many unbanked, that produce raw materials get credit.

It seems ironic that it’s covered in an article I wrote titled ICOs and BTC. The controversy of the week in December 2017 concerned the by-then dodgy reputation of initial coin offerings and the need for U.S. securities regulators to step in, which they did. The event was the launch of bitcoin futures on the Chicago Mercantile Exchange.

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