Bitmain co-founder hails crypto regulation for restoring market confidence – TechCrunch

The collapse of Three Arrow Capital and counterparties shrouded in crypto hedge fund issues has raised questions about the strength of the heady digital asset investment space. For industry survivors, seeing their rivals fall apart overnight has been an alarming experience.

To understand where the industry might go after the market turmoil, we spoke with John Ge, CEO of Matrixport, a Singapore-based digital asset manager with over $10 billion in assets under management and custody. .

Ge was previously the head of investment and finance as well as a founding partner of Bitmain, the world’s largest manufacturer of Bitcoin mining machines. Along with co-founder and former CEO of Bitmain, Jihan Wu, Ge co-founded Matrixport in 2018.

Three Arrow Capital, known as 3AC in the crypto community, was one of the largest crypto hedge funds in the world before its fall. His success was based on a risky strategy: he borrowed aggressively from crypto lenders and in turn invested that money in other crypto projects.

When cryptocurrency prices began to fall earlier this year, the company, along with other similar businesses betting on rising cryptocurrency prices, defaulted on their creditors and plunged into liquidation. . The crypto market is down $1.8 trillion since its peak in November, driven by falling Bitcoin and Ethereum prices.

The recent stock market crash is “inevitable,” Ge said in an interview with TechCrunch. “The central problem is that we have seen players whose business model is like a black box. They borrow money from investors without giving transparency on how the money will be used.

The other problem is that these crypto managers act as both a player and an arbiter, Ge claims. “Many of them provide both asset management and proprietary trading. An asset manager should not engage in proprietary trading, and if they do, they must adhere to strict requirements in terms of leverage.

“Even the most conservative investment strategy involves risk and can lead to losses, but the principle is to be transparent with your clients, and not fraudulent, misleading or misleading,” explains the founder.

Matrixport, which serves individuals as well as more than 500 institutions in Asia, Europe and North America, was exposed to 3AC and filed a claim alongside other creditors. But Ge says the company’s exposure is “relatively low” compared to other industry players’ exposure and is considered “minor” compared to Matrixport’s equity.

As for how to restore investor confidence in the crypto sphere, Ge believes regulators are on the right track to strengthen oversight of consumer-facing crypto products and retail investor protections, as is the case at Singapore.

But it is “unrealistic” for regulators to design risk control models for institution-focused asset managers. “The pace of regulations tends to lag behind the pace of industry development.”

Ge thinks investors have “lost some level of confidence” in the crypto market and the industry will take time to recover. On the other hand, he thinks competition has diminished for survivors like Matrixport because “a lot of other players have left.”

Matrixport told Bloomberg last year that it plans to go public in three to five years and Ge said that plan “has not changed”. It’s too early to tell which market the company is floating its shares in, but the US is a “likely” option given investors are more “welcoming to crypto innovation.”

Leave a Comment

Your email address will not be published.