It’s time to grow up
I’m pissed.
I’m pissed that this industry continues to put eccentric sociopaths on a pedestal. I’m pissed that the retail public continues to get steamrolled by liars and thieves. I’m pissed that for all the technical possibilities that public blockchains introduce, we don’t take advantage of nearly enough of them.
In this industry I’ve met some of the best people in my life — and I’ve encountered some of the worst people on the planet. I started Castle Island Ventures because I saw something special was happening and I wanted to be a part of it.
I saw entrepreneurs that were mission driven. Entrepreneurs that wanted to change the way that money works, the way that financial services work, and the way that the internet itself works. Entrepreneurs that wanted to create a world where people were self-sovereign over their money and their digital identities. Their passion made me take the leap to become an entrepreneur myself.
Along the way we’ve always had scammers and grifters. We’ve had way too many of them lately. Their existence undermines what we are trying to do here.
We have something that could be great.
We have some of the most talented people in the world spending their waking hours trying to improve the human condition and give people the tools to be more independent over their money and digital identities. The real builders in this industry would be building regardless of crypto prices. They are purpose driven.
If we want to get this back on track, we need to clean up our industry. I don’t have all the answers, but there are some things I suggest we redouble our efforts on:
- Self-Custody: We need to make it easier to for people to safely hold their private keys. There are companies building technology in this space — but we need more builders. We need to make it easier. We need to move the user experience up the priority list.
- Proof of Reserves: We need to acknowledge that not everyone is going to hold their own keys and will opt to use a custodian. So, we need to hold our custodians and exchanges more accountable. My partner Nic has been banging the drum on this for a long time with his proof-of reserve page. Proving reserves needs to be the industry standard in the same way that getting an annual audit is the standard for a well-run company.
- Exchange Hygiene: Centralized exchanges need to implement cross-exchange trade surveillance sharing agreements to eliminate market manipulation. It’s a good thing for customers, so we should do it — end of story. We also need on-ramp providers to comply with the travel rule — whether you like the rule or not it’s the law and you are putting your customers at risk by not complying. Lastly, we need clear legal assurances segregating client and operating capital.
- Conflicts: The financial services industry learned a lot of things in the 1930s. Parts of the crypto industry seem intent on making the same mistake all over again. Exchanges shouldn’t own prop trading firms. Insider trading and disclosure frameworks should exist. Exchange employees and affiliates shouldn’t front run listings. Let’s wake up.
- Token Vesting: This has the potential to be the next great scandal of the industry. We need to align on a set of standards around investor/team token holdings and vesting schedules immediately. The way this works now is a total joke and is structurally set up to prey on retail investors. Ryan Selkis at Messari has been banging the drum on this for a long time. It’s time to listen.
- Permissionless Finance: We should protect the right of individuals to transact peer to peer on public blockchains. We should invest in privacy preserving technology and user-experiences that protect end-customers. We should use the benefits of public blockchains to build systems with verifiable real-time disclosure instead of trusting centralized actors. We should encourage regulators to regulate the on-ramps, not the networks.
- Regulatory: The industry is about to have a rocky road ahead in Washington. We need to work collaboratively and demonstrate that SBF/FTX are not the face of the industry. We need to work towards getting clarity on which assets are securities, and who oversees the crypto-commodity and crypto-securities spot markets. I continue to believe that the answer to the securities question can be best addressed through Commissioner Peirce’s Token Safe Harbor Proposal 2.0.
The next few months are going to be rough as we collectively sift through the fallout. If we take this time to get our house in order, we can build this industry back from a new foundation.
I’ll be here for it.
Matt
