This is about as 2001, post-dot-com-bubble-bursting-bad as it gets. The leading banks have abandoned the crypto industry and other banks have pressure from regulators to stay away. Accounting firms and auditors for BSA, SOC, and financial statements have tossed their books of crypto-related customers over the side of the boat. The SEC seems to be at war with every aspect of the industry. Venture capital has run for the sidelines, throttling new entrants access to financing. Many exchanges and OTC desks are abandoning the United States, with Bittrex..a Seattle-based company…being the most recent.
Man it’s bad.
However, this doesn’t change the fact that the blockchain as a ledgering and authentication technology is going to utterly transform the world as we know it. It will.
And as dark as the skies are at the moment, remember that it was at a similar time in the history of the internet, and again during the financial crises, that saw the rise of Google, Amazon, Stripe, Square, Facebook, Venmo, AWS, Robinhood, and so many other great companies. Out of the ashes come the next-gen entrepreneurs who seize the technology for its true utility and surpass the original early firms that were built on nothing more than hype.
Financial infrastructure is needed. Regulatory clarity is needed.
I won’t lie, it’s going to be a mess for a while. And therein lies the opportunity. By the time this all gets solved, the next great companies will be set in the foundation. Yes, really high risk moment in time but it’s a fact that these things will resolve themselves and the future winners are the people building businesses right now, in this darkest of hours.
Already we are seeing a variety of small banks (well, smaller than SVB and Signature) stepping up to service the industry, with innovative CEO’s who are brushing off the regulatory pressure, accepting the risk and banking the industry anyway. We are seeing trust companies, like Fortress Trust, building the tech and services for custody, payments, wallet-as-a-service, and counterparty transaction settlement. We are seeing entire teams exiting major and mid-tier accounting firms to set up their own shops and build what will become significant firms around a foundation of crypto-related customers. We’re seeing broker-dealers getting creative and pressing forward with digital initiatives, heck even NASDAQ just announced they’ll start custodying crypto. The IRS appears to understand that NFTs are neither securities nor collectibles, but instead just containers for something that could be either. And we see the CFTC wrestling with the SEC over who should regulate crypto, as well as titans of Wall Street along with prominent crypto firms pushing back hard and willing to take the fight.
From my perspective, I don’t see a housefire. I see a wide variety of industry participants setting the foundation for jaw-dropping innovation…and firms using it. At Fortress, our customers are getting ready to ditch archaic employee, contractor, gig-worker and vendor payment rails like ACH, wire, Swift and physical checks and completely replace them with digital dollars delivered via blockchain. They are tokenizing securities for a whole new world of trading for investors and capital formation options for entrepreneurs, real estate developers, and SME’s. They are tokenizing music, event tickets, automobile titles, estate documents and intellectual property. They are derisking Instagram, Facebook and TikTok by giving away NFTs and thus forming direct, uncensored relationships with their fans. And so much more.
So yes, things are dark. There is blood running in the streets of Paris. But that will pass, and this industry is (metaphorically) the most beautiful city in the world. Hang in there, it’s gonna get good…no, it’s gonna get insanely great. To quote Steve Jobs, “we’re here to put a dent in the universe. Otherwise why else even be here?“