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Crypto rule confusion is an investor’s worst nightmare, Criptonite CEO says

Florian Rais, CEO of Geneva-based Criptonite Asset Management, isn’t happy with the lack of crypto clarity in the U.S.

The U.S. Securities and Exchange Commission’s (SEC) ongoing delay regarding spot Bitcoin ETF applications, and its “misalignment” with the U.S. courts, is a nightmare for investors, Rais tells

Read on for Rais’ take on how regulatory confusion in the U.S. has ramifications abroad, and whether the current bear market will inspire M&A activity.

Why is clarity in the U.S. so important for a cryptocurrency-focused asset manager like Criptonite?

Rais: It is not new that the U.S. drives the worldwide financial markets. Across most asset classes, it’s been larger and more active in volume than any other market in the world. Now that cryptocurrency enters its adoption phase by traditional asset firms, we — like others — understand that investment flow will only come if U.S. firms are able to invest with confidence and through known, solid, and proven investment products. Spot ETFs have taken an important position over the past couple of decades, allowing investors to build positions in various asset classes.

Despite Grayscale’s win, the SEC postponed its decision on Bitcoin ETF applications from Bitwise, ARK Invest, BlackRock, VanEck, WisdomTree, and Invesco. Is this detrimental to investors?

It is more the confusion created by this situation rather than the delay itself that matters. Stability, predictability and rules of law have been essential contributors to the development of capital markets around the world and predominantly in the U.S. Now that there is growing misalignment between the SEC and the U.S. courts, investors are facing a situation that is unpredictable. This is an investor’s worst nightmare. Everyone is left to take a bet about SEC’s next announcement, and it is hard to see how this protects investors. But it surely keeps investors at large for now.

Wave Digital Assets acquired Criptonite and promised to buy more firms outside the U.S. Do you foresee more crypto-focused asset management firms consolidating soon?

I certainly believe that there will be a wave of consolidation in the coming months. This extended bear market has drained resources and tested business models to their limits. Therefore, we end up with some very efficient crypto investment managers at very attractive valuations. But more than pure economics, once we can firmly leave the bear market behind us, most firms understand that the next cycle will attract more institutional money. To attract institutional investments, firms will have to meet some minimum requirements. They’ll have to be regulated and have a long enough track record in order to have large assets under management, and ideally to have a strong client base and references. Wave Digital and now Criptonite tick all the above boxes.

Does FTX’s legal trouble, or the SEC’s lawsuits with Binance and Coinbase, hurt your line of work?

We decided when we started the company that we needed to be regulated. Coming from traditional finance, we didn’t believe that a genuine asset class could attract institutional money without being regulated. We are today witnessing an interest from the largest traditional investment firms, which hardly could consider using unregulated counterparts. I’m less surprised about the behavior of the SEC against Binance than I am with Coinbase. I wish that we could evolve in an environment where trust is being built between investment firms and the regulators, similar to what we witnessed in Switzerland since the beginning of the crypto era. Certainly, the fact that FTX managed to convince first-tier investors has bruised egos and shaken confidence. We all wish that we would have a unique line of thought from both regulators and politicians to be able to genuinely provide serious and reliable crypto asset management, leaving uncertainty aside. This shall contribute to protecting investors’ interests.


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