Kraken MD talks CBDCs, FTX and crypto winter expectations

Blair Halliday is the UK CEO of Kraken – one of the world’s leading crypto exchange platforms. As the crypto winter continues and the marketplace experiences constant changes and events – such as the fall of FTX – we asked Halliday for his views on the latest crypto developments, CBDCs and the state of DeFi in 2023.

You are the UK CEO of Kraken – one of the world’s most recognized crypto exchanges. Describe your current role and your journey to it.

My journey into crypto started in the traditional financial world. After cutting my teeth with the NatWest Group in their Financial Crimes department, I discovered the crypto ecosystem and recognized the opportunity to tangibly improve the world through digital assets. From there I held several roles at prominent fintech and crypto firms including Gemini, Circle, Paysafe Group and CashFlows, mainly in compliance and financial crime before moving into wider business management.

I joined Kraken earlier this year as Managing Director of UK Business, one of Kraken’s most active trading markets and prominent jurisdictions.

In this role, I drive regional growth and manage our extensive range of commercial, regulatory and political relationships. I am delighted to be on Kraken, as one of the world’s largest crypto exchanges, and proud to play a part in accelerating the adoption of crypto assets in the UK.

What are the biggest changes we will see in crypto over the next twelve months?

The next year will be a restorative year for the crypto industry. After 18 months of volatility, bull market mania and predatory behavior by rogue industry players, I expect this year to be more entrenched as developers focus resources on developing products and services that offer utility, not hype.

There will undoubtedly be a regulatory response, both in the UK and other jurisdictions, to the consequences of FTX’s insolvency. The high-profile nature of this collapse has catalyzed conversations between regulators and lawmakers about how to ensure that consumers can be adequately protected from risks from bad actors and from those operating outside the regulatory realm. Encouragingly, the UK government recognized that crypto adoption is the future quite early on and is developing a regulatory landscape for crypto in the UK. We expect the next twelve months to be crucial in this effort and hope that focused minds can result in a sensible, workable framework that protects consumers without stifling innovation. The UK is striving to become a tech hub for crypto adoption and we are happy to support their efforts to get there.

Ultimately, I believe we will see greater adoption of cryptocurrencies as a strength once confidence is restored in the crypto industry. In 2022, Ukraine showed a great example of how this innovative technology can offer a last resort for citizens left behind by traditional finance in their hour of need. But cross-border payments aren’t the only use of crypto, and I expect we’ll see more practical applications emerge as smart minds in the industry find ways to use the technology to solve real-world problems.

Is there any end in sight for the current crypto winter?

This is hard to call when the industry is clearly in the depths of crypto winter. However, I would argue that we will not get out of the crypto winter just if the prices of popular assets rise in the short term. There is probably still contagion in the market and the trust of several stakeholders has been broken. This will take time to heal regardless of price volatility.

That said, Kraken is bullish on the crypto space for the long term. We are true believers that the innovation of crypto will revolutionize and democratize access to financial services and improve lives. This is not our first bear market and we are fully focused on continuing to be a gateway for people to engage with the future of digital assets.

How has FTX’s demise affected the rest of the industry?

FTX’s insolvency has undoubtedly set the industry back several steps on its journey towards mass adoption. Whether we are talking about legacy finance or crypto-assets, it is simply unacceptable for clients to lose their assets due to a custodian’s mismanagement. Unfortunately, but understandably, this could have a negative effect on how some UK investors view this asset class for years to come.

The first crucial step will be to rebuild trust in the crypto community. For this, centralized custodians, such as Kraken, have a role to play in educating people about the red flags that were missed with FTX, as well as how FTX’s collapse was not a failure of crypto-technology, but simply a bad actor as it has been alleged to be fraudulent. Education must also be combined with the industry’s efforts to become more transparent if it is to succeed in the long term. Proof of Reserves has been a valuable first step in this journey, but ultimately more is needed. So my prediction for 2023 is that we will see innovative solutions from centralized players to improve transparency and demonstrate that they have the customer’s assets supported 1-1.

What is your prediction about the launch of CBDCs – and how will they affect the DeFi space and when will we see them introduced?

Today, more than 100 countries are in various stages of developing CBDCs and around 10 have successfully launched to the public. There are mixed opinions on how CBDCs will impact the De-Fi space, as well as how closely CBDCs align with the underlying principles of cryptoassets.

Although the applications are endless, it is possible that CBDC could give governments and banks the ability to track transactions and provide real-time censorship to individuals who disagree with their viewpoint. While this may seem outlandish, it’s not out of the realm of possibility, so the industry is watching closely as CBDCs roll out across different countries to assess whether they act as a force for good or provide tools for control.

What can we expect from Kraken in terms of new products and services in the coming year?

This year’s biggest launch has been our NFT marketplace. We opened our public beta earlier this month, allowing enthusiasts to safely explore the NFT ecosystem while removing many barriers that hindered the industry’s growth during the recent bull market. For example, we recognized that ETH gas fees had become burdensome when the network was congested and effectively prevented many people from participating because they were being priced out. As such, Kraken NFT enables transactions to take place with zero gas fees on the platform. We also allow clients to pay for their NFTs with cash or crypto assets in their account, as well as track the rarity of their NFTs on the platform. We believe this will change the game when the market turns!

In 2023, we have several products on our roadmap that we believe will drive forward the digital asset space and improve the user experience for those already in the pro trading and retail crypto ecosystems.