Despite an onslaught of recent criticism from members of Congress, the Treasury Secretary, and even President Donald Trump, Bitcoin and other digital currencies and crypto are absolutely here to stay, according to the head of one of the country’s most influential blockchain finance companies.
Cryptocurrencies, most popular being the decade-old Bitcoin, are volatile but resilient, said Dan Schatt, co-founder and president of Cred, a Silicon Valley-based decentralized global lending platform that facilitates open access to credit anywhere and anytime.
“Just like the evolution of most things that will be disruptive, it’s impossible to stop. People are gravitating to it. You can’t stop the rise of how many people are utilizing Bitcoin and getting more interested in crypto,” said Schatt, a frequent industry speaker and author. “You can’t argue with the fact that now even banks are leveraging it behind the scenes in ways that drive efficiencies. Absolutely, I think crypto is here to stay.”
Three major developments in the past couple of weeks caused some alarm in the decentralized finance industry. On July 11, Trump tweeted that he was “not a fan” of Bitcoin and other cryptocurrencies.
“Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity,” the President told his 62 million followers. “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations.”
Four days later, Treasury Secretary Steven Mnuchin echoed his boss’s tweets during a news conference.
“Cryptocurrencies, such as Bitcoin, have been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking,” Mnuchin said.
But maybe the most significant development came from Facebook’s David Marcus’ two days of tense hearings before the Senate Banking and House Financial Services committees. Marcus was promoting Facebook’s controversial plan for its own digital currency, called Libra. The company indicated in June that it planned to launch the token early next year.
Some in Congress favored the idea and the need for more financial innovation but Marcus ran into a wall of skeptics. Some called on Facebook to pause the idea while Congress approves legislation to regulate Libra and other tokens. Others on the committees wanted the idea shelved altogether.
Marcus’ appearance came days after a $5 billion Facebook fine by the Federal Trade Commission for privacy violations. All of this as the company continues to reel from criticism over its sale of customer information during the 2016 presidential election.
U.S. Rep. Anthony Gonzalez, R-Ohio, seemed to best capture the skeptics’ concerns over the two days of hearings. Looking squarely at Marcus, Gonzalez didn’t mince words.
“What today’s hearing is really about is trust and whether we can trust your company,” he said. “You’re really low on the trust spectrum.”
Despite rumblings on Capitol Hill, there was little impact on the crypto industry. Bitcoin, which represents the lion’s share of crypto trading, opened July 15 at $10,227 per token, dipped to just above $9,000 as the congressional testimony heated up a day later but ended the week at $10,556.
“Their comments didn’t really do a lot. It only strengthened Bitcoin,” Schatt said. “It also made it clear that if you’re creating a crypto technology company as a centralized entity, it’s going to be challenging to get anyone government to accept what you’re doing. That’s where the world is headed.”
The reaction from the Bitcoin community was not much of a surprise, said Schatt, a former PayPal executive.
Bitcoin has been on a bull run this year, up more than double digits. It’s a long way from when the token was issued in 2009 with a value of zero dollars.
“I think that if you look at the last 11 years of Bitcoin, even with the seven times that it has dropped by 70 percent-plus and come back, you only see more transaction volume,” Schatt said. “It’s even harder to create a security issue because it’s a lot more decentralized than it was even last year or the year before.”
Bitcoin has been so lucrative — and relatively stable — this year that Cred has partnered with Bitcoin.com to allow customers to earn up to 10 percent interest on Bitcoin and 6 percent on Bitcoin Cash posted as collateral with Cred. Bitcoin.com customers will be required to make a six-month commitment to benefit from the partnership but will have the option to roll over assets for additional periods if they wish.
Schatt said he remains bullish on Bitcoin although he expects efforts to regulate crypto will continue well into the future. It was clear from the hearings on Capitol Hill that several bills are in the works. Schatt said he is not worried because some countries, such as Singapore, have had success in working with the crypto industry on regulation. He believes both sides could benefit if Congress does the same.
“When the World Wide Web first came on the world stage, what did we see it used for? We saw instances of pornography, gambling and lots of drug sales. Whenever you have a new technology, you often have those industries that operate outside of the legal periphery that tries to take advantage of the technology before you have clear regulations. That’s nothing new,” Schatt said.