FTX collapse won’t slow down crypto economy, CEO of Blockchain.com says

This week’s FTX collapse is “a tragedy and total failure of governance,” Blockchain.com CEO and co-founder Peter Smith told CNBC’s “Closing Bell” on Thursday, but it’s not going to slow down the crypto economy in any way.

According to Smith, the rapid demise of Sam Bankman-Fried’s company will accelerate a trend back toward regulated crypto institutions, as well as a shift back toward individuals holding crypto assets on their own private keys.

“Crypto is one of the very few assets in the world that you can keep yourself, and I think we’re going to see people increasingly go back to that model, as well as move to a model of trusting regulated companies in the space, ” Smith said.

Smith said the general crypto and blockchain economies, and companies like his that rely on private funding, shouldn’t face major barriers to receiving money from investors. He said for all the hype — FTX was recently valued at as much as $32 billion, though investors had marked it down to zero this week — FTX was not a market leader or key player in the crypto ecosystem. It was, Smith says, very popular in Silicon Valley-based groups, which was confusing to him since investors were excited about the company that had very low levels of governance.

The FTX situation will cause more investors to focus on company structure in crypto going forward.

“This was very much a momentum play in Silicon Valley, and we’ve seen that clearly didn’t work,” Smith said.

Some analysts have said that crypto exchange Coinbase could be among the companies that could benefit from a greater focus on regulated entities. Brian Armstrong, CEO of Coin basewhich announced additional layoffs Thursday, told CNBC Thursday afternoon that the job cuts were related to general market conditions and the need to manage costs and cash as a public company.

SEC Commissioner Gary Gensler told CNBC on Thursday that the American public needs to “be careful, watch out. There’s still a lot of non-compliance, and when you give somebody your token and they go down, you’re just going to be standing in line at a bankruptcy court and they can take your token and do all kinds of things without proper disclosure. Now, if it’s one to one back, and there’s really good disclosure, and your protection against fraud, manipulation, that’s all we’re saying. It’s what the securities laws are.”

In response to a question about Coinbase and Binance (FTX’s potential acquirer), Gensler added: “I’m not going to speak to any platform, but I would say you have these rules and the laws are clear, but don’t assume that these firms abides by the rules and laws that the New York Stock Exchange or the major brokerages abide by.”

Armstrong pushed back in the interview, saying that as a public company, concerns about crypto custody are a “non-issue.”

“We keep client funds one-to-one supported,” he said. As a public company, he added, it has accounts audited by four major accounting firms. “What happened with FTX cannot happen on Coinbase, and we are a regulated institution in the United States,” Armstrong said.

Blockchain.com, which came in at No. 7 on CNBC’s 2022 Disruptor 50 list, is the company behind about a third of all bitcoin network transactions since 2012.

“The ultimate reality and the coolest part of crypto is that you can store your money on your own private key where you have no counterparty exposure,” Smith said. “And it’s been our mission to make that possible for the past decade.”