Regulators should look at crypto for a good example of how a financial system should look like

Regulators should look at crypto for a good example of how a financial system should look like

Alex Mashinsky, billionaire entrepreneur, and CEO of Celsius, was recently interviewed on Kitco News on his views on how his company was challenging the traditional banking system in order to give investors far more yield. 

“Cryptocurrencies, and blockchain, will govern all the money in the world.” 

Mashinsky explained how prior to 2017 it was almost impossible to earn any yield. He said this was because the Federal Reserve had lowered rates to zero. However, whilst small investors were left with these near zero yields, banks, such as the likes of JP Morgan, were making record profits. 

He went on to say that during the Covid-19 outbreak, the government had stopped levying fees on JP Morgan, in turn asking that the world’s biggest bank to waive fees for its customers during the crisis. However, he said that the banks had chosen to continue charging everyone “obscene fees”. 

Mashinsky said that Celsius was a new type of institution that sought to operate on behalf of investors. He said that the Celsius platform accepted 45 different currencies, which were then lent out to institutions, who then paid fees, 80% of which were returned to the Celsius platform users. 

He stated that Celsius users could decide which currency they wanted to store on the platform, and that they would be able to earn yield on it which was paid every week. He added that even gold could be stored, and that it would earn a current 5.5%. He said that earning yield on gold had not been done in its entire history. 

When asked what guarantees were there that an investor would get their principal back, Mashinsky said that Celsius had many types of insurance, which even covered their service providers as well. This was unlike the situation with the FDIC, which is generally believed to be there for such an event. 

“The FDIC does not have enough money to bail out even one of the top ten banks in the United States.” 

Mashinsky referred to a law passed in 2012 that requires all banks to have a bail-in before the FDIC is required to bail any of them out. He pointed to how this had happened in Cyprus, and in several other countries. He said that among the signatory countries to that agreement were the US, most European countries and others around the world. 

“During Covid, the Fed had to intervene and put a safety net under the market, because they knew that if they just let the market go down another 10 or 15%, all the financial institutions would be insolvent.” 

Mashinsky was asked to comment on Senator Elizabeth Warren’s recent statement that regulation was coming that would pose a significant risk to cryptocurrency companies. He replied that he invited Senator Warren to learn more about Bitcoin and the cryptocurrency community. 

He went on to challenge her to find a single customer of Celsius who had suffered because of joining his company.  

“You show me a bank, and I will show you tens of thousands of customers immediately who will tell you, ‘I suffered with their credit card’, ‘I suffered with their loans’, ‘I suffered with their fees’, ‘My home was confiscated’, ‘I lost my job’, and so on and so on.” 

Mashinsky continued by saying that the banking lobby was one of the most powerful in Washington. 

“They are spending billions of dollars every year to whisper in the ears of the politicians what they think is the narrative that needs to govern financial services.” 

Mashinsky finished the interview by harking back to the “draconian” 1934 US law that stated that citizens were not allowed to hold their own gold, and those that did hold it were required to sell it to the government for a stated price.  

He said that a few weeks later, when gold was 2 or 3 times higher, the government sold it and pocketed the increase in value. He explained that this was the only way for the government to issue more dollars, given that the dollar was then pegged to gold. 

In Mashinsky’s view, putting burdensome regulation on cryptocurrencies was only going to see crypto currency projects transferring elsewhere, where open minds would see the value in this new technology. 

“For us, for the US economy, we will build on innovation, we will build on transparency, we will build on open dialogue, and I urge politicians not to make the mistake of listening to one side or one opinion and basically killing what could be the next internet” 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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