The cryptocurrency market lost $500 billion this year as prices crashed. This market, known for big ups and downs, was also recently declared "the number one financial threat of 2022" by the Minnesota Commerce Department.
Is it as dangerous as the government claims? Or is it the future of finance as we know it?
You wouldn’t get the warning if you watched the crypto-commercial-riddled Super Bowl, or the courtside sponsorships in the NBA, or the myriad celebrity endorsements.
The marketing isn’t doing much to quell Max Zappia’s fears.
“The lack of all those protections that have been built into the otherwise financial market, makes me lose sleep at night,” said Zappia, deputy commissioner of financial institutions for the Minnesota Department of Commerce. “Worried for people, worried for potential money laundering activity, worried for investment loss and market instability.”
His fears have merit. Last year, according to a recent report, scammers stole $14 billion in cryptocurrency.
“Often the complaints are, ‘my money is gone, help me,’ and unfortunately in many cases we can't. But the root concern would be unlicensed or unregistered activity,” said Zappia.
According to coinmarketcap.com, there are 306 cryptocurrency exchanges to date. Just 15 are actually licensed in Minnesota to transmit money to and from consumers.
Crypto Exchanges Licensed by MN:
- Gemini Trust
- Okcoin USA
- Sofi Digital Assets
- Tzero Crypto
- Zero Hash
The state is warning all consumers to be vigilant against fake crypto wallets, pump and dump schemes on smaller coins with skyrocketing and then plummeting prices, as well as NFT and multi-level marketing offers for crypto.
But, the argument could be made in support of the crypto space and its future.
Despite plummeting coin prices (some losing 90 percent of value in the last year), the market has gone from $14 billion in 2016, to $1.3 trillion today.
“I see regulation coming,” said Vivian Fang, associate professor of accounting at the University of Minnesota Carlson School of Management and professor of the school’s new cryptocurrency course. “I don't think regulation is a bad thing for this market. It is a necessary step to stability and acceptance.”
Fang says she has seen growing investment from institutions and a growing acceptance among all users.
A recent NBC News poll shows 1 in 5 Americans have dabbled into cryptocurrency.
The ratio was much higher among students of Fang’s cryptocurrency class.
“What do you think cryptocurrency will look like in the next ten years?” I asked the students over Zoom.
“What will it look like in the next 10 months?” said Kyle Lee, a student. “I mean, I don't know any of us can really say.”
Fang started the class in 2018 as the crypto market was crashing (again).
“In year one, I didn't have enough enrollment. We had to move the class to a different semester. And this year, the class was fully registered within 24 hours and it had a long waitlist,” said Fang.
Fang thinks crypto and its underlying tech is too big to fail now, and many, including President Joe Biden, think the market is mature enough for regulation. He issued an exhaustive executive order in March ordering a massive review of crypto’s threats and benefits to the U.S.
He even hints at creating an official U.S. digital currency.
Reports are due by the end of summer from the federal government, which should give consumers insight on how or when the government might rein in the crypto sector.