Recent Crypto Insolvency Report from Pwc Shows Details on Inevitability of Crypto Regulations
The cryptocurrency industry, like the traditional finance industry, tends to go through ups and downs, and nearly anyone that runs a business in this sector knows that there will be financial mishaps along the way.
Facing bankruptcy or worse, some companies will choose extreme, and sometimes illegal, ways to dramatically exit the market. A new report from Pwc shows the demise that some of these companies go through, aiming to be a catalyst for change in the market.
Pwc is an accounting firm which has a branch in Hong Kong. This Hong Kong branch of the company recently released their report on crypto insolvency, providing a way for consumers to save themselves “when things start to go wrong.”
Research from January last year, which was collected by Boston College, showed that $12 billion was raised amongst 4,003 ICOs.
Unfortunately, the activity after the initial launch isn’t always enough to keep these new exchanges going, as only 44.2% even survive for more than four months after the launch date. ICOs used to be the best way to get a start in the crypto industry, though they have turned into nothing more than a brief success before a rock-bottom failure.
Satis Group, an ICO advisory firm, found that 81% of coins that had at least a $50 million market cap were discovered to be scams instead. Continuing, Satis Group said,
“Whilst the crypto ecosystem continues to make considerable progress in building out its infrastructure and ‘institutionalizing’ the space, many crypto players are facing challenges due to a broad range of issues, from a fall in crypto asset prices to more regular start-up challenges. This is forcing many well-intentioned crypto firms into financially distressed situations with the need to urgently restructure their operations or redefine their business strategy in order to stay afloat.”
Once the report was released, Henri Arslanian, Pwc fintech and crypto leader for Asia, said that he believes that the crypto community is going through the same thing that happened during the last tech boom.
This belief is shared by many big players in the crypto industry. Based on his knowledge of the industry, he sees many more cryptocurrency exchanges and firms on the brink of shutdown, though there will be a few that survive. He added,
“And the firms that survive may change the world in ways we can probably not even imagine today.”
Every startup faces challenges, and the crypto industry is no exception. Right now, their unique problem appears to be treasury management, considering that their funds are raised in crypto, but their expenses still have to be paid in dollars.
When the market was thriving, cashing out was no big deal. The bear market, however, means that more cryptocurrency must be sacrificed for the same payout. This is made even more difficult with ICOs, which have all but been eradicated.
Arslanian’s background as both a crypto policy advisor and a lawyer has given him a bullish opinion of regulation in the market, saying that it is the only way to keep the industry alive.
He sees the regulations that other countries have established and believes that this clarity has made it possible for crypto to thrive as much as it has in their economies. Viewing regulatory clarity as a positive development, he added,
“The average regulator I speak with is often more knowledgeable on crypto assets than the average financial services professional.”
Right now, the main priority of the crypto industry should be to find ways to bring in institutional players, in Arslanian’s opinion. However, the fact is, these players will not come striding into an industry that lacks regulatory clarity.
Other countries are way ahead of the United States, considering that there are three federal authorities that have control over different regulations.