Pelago’s Co-Founder Sees DeFi Crypto Shining

The black swan collapse of FTX in November 2022 seriously rattled global confidence in crypto.

It also increased scrutiny by US regulators, although no new laws affecting the industry have been passed.

Now, according to Dr. Yan Zhang, co-founder of Web3-native payment aggregator Pelago, the collapse last month of both Silicon Valley Bank (SVB) and Signature Bank paradoxically restores faith in the digital asset industry and its pr. future potential that has not yet been realized.

Zhang told PYMNTS CEO Karen Webster in a recent interview that the banking crisis has shown consumers, investors and businesses around the world that traditional finance is “not better” than crypto anymore.

If FTX put the crypto world on red alert that centralized exchanges can be incredibly risky and come with the threat of mismanagement, then SVB’s collapse has done the same for the traditional financial sector.

“It’s a long-term benefit, despite some short-term frictions,” Zhang said. “It will encourage people to think more about what the future should look like and how regulation should work.”

read more: Decentralized payment protocols are the savior of the crypto sector

Decentralized financial protocols remove human-driven risks

But for now, Pelago’s co-founder emphasizes that people see both FTX and banks collapsing while decentralized payments and FinTech infrastructure remain safe.

“This technology is actually better than the existing infrastructure from a security perspective,” Zhang said. “Merchants should never [have to] worry about their money being stolen.”

At the same time, he adds that with Signature Bank failing and Silvergate voluntarily closing, the US crypto industry has now lost two of its primary banking systems.

“[Everyone] looking for new places across the river,” Zhang said. “It’s not [much left] in North America, which is why they are looking for alternatives abroad.”

Also driving this shift, he noted, is the obscurity of U.S. crypto regulations.

“It has put the entire industry into a state of chaos,” Zhang said. “The instability of regulation is really hurting the industry. From my perspective, no decision is worse than bad decisions. It will take time to discuss, but the industry is looking for certainty – these things are allowed, these things are not allowed, these things are temporarily not allowed. “

If there is no security, he added, businesses will naturally start looking to move to different environments where regulations are clearer and they can do business with greater confidence.

“It will be a competition between different countries,” Zhang said. “The country that can come up with new regulations and policies that embrace new technology will win these competitions… when the US shut down crypto-friendly Signature Bank and Silvergate Bank, Hong Kong announced that it welcomed [crypto businesses].”

See also: Chinese officials call for stronger global regulation of crypto

Is the world heading towards an increasingly unregulated landscape?

PYMNTS has previously written about how the US has yet to establish a comprehensive framework or set of regulations specific to the crypto industry, relying instead on existing securities and commodities laws and frustrating the crypto companies that have so far run afoul of them.

Still, given the pace of innovation, Zhang said he sees a potentially “deregulated” world in the future.

“It’s challenging for regulators because the creation of new regulatory policies will always be slower than the speed of innovation. You can see this now with the advancement of AI and people panicking,” he said.

That is why, Zhang stressed, it is important that regulatory decisions are made in the first place.

“Even a bad decision, a bad regulation, it’s better than no regulation… in the future we can always revise the decision and work on the framework. [The crypto] the industry can live with any regulation, as long as it is clear, he said.

He said the widening gap between the speed of innovation and the time it takes for regulatory policy to catch up is “not good for mass adoption of new technology,” going so far as to call it “pure chaos” — but noting that it does. provide opportunities for innovation.

“Finally,” he said, “the technology that serves [the needs of] the best people are going to be the ones who excel.”

For Pelago’s co-founder, this technology is Web3-native DeFi payment protocols.

“It’s a complicated world,” Zhang said, and businesses, merchants and consumers are looking for certainty.