8min chapter

Boardroom Governance with Evan Epstein cover image

Joe Grundfest: "The Biggest Governance Trend for 2024 is the Corporation as a Piñata."

Boardroom Governance with Evan Epstein

CHAPTER

Cryptocurrency Market and Regulation

The speakers discuss the state of the cryptocurrency market, highlighting the decrease and rebound in market cap, as well as the importance of regulation in preventing misuse. They also mention the SEC's case against XRP and its implications for securities regulation.

00:00
Speaker 2
Yeah, no, I think that's going to be something to follow closely this year. But let's move into another topic that you and I have had a conversation for many years now, which is crypto. Last year, the crypto, the total market cap was really down to 850 billion dollars. This is down from a high of 3 trillion, but there's been a rebound. And today it's about 1.6 trillion. Bitcoin is about 44,000 Ethereum 2,200. There seems to be some level of recovery in the crypto markets after about two years of kind of this winter. And the question still remains, the industry's regulation. And, where do you see this? And maybe also, if we can comment on the SEC's case against XRP and how that played out and what the implications for securities regulation in crypto assets. Look, so
Speaker 1
a couple of observations, an increasing number of governments, I think, are going to wind up coming down harder on crypto in the future than you asked. You simply look at the fact that the North Koreans are making a pile of money in this space. You look at how easy it is to use these crypto transactions to fund things that the West isn't very fond of. So that makes it a very easy prediction to say that everything is going to vector in a direction that has tightening implications for the crypto market. And people say, gee, the government can't regulate how crypto works. Well, in a certain sense, it can't. But governments can regulate the choke points where fiat currency goes into or comes out of the crypto system. And, you know, governments need to learn better how to do this, but they'll figure it out. They'll get there. They'll get there.
Speaker 2
And what can you tell us about the win of XRP and that litigation with the SEC? A couple
Speaker 1
of things. Number one, you might want to be careful extending the XRP precedent to other situations, you know, because look at FTX, look at Binance. All right, you have many more situation. Let's put it this way. The amount of capital reflected in the FTX and the Binance situation is much larger than XRP. And it's not hard to distinguish XRP and its defense from many other situations that are in the marketplace today. So in other words, XRP can still win in its litigation. And lots of other crypto operations would still lose big. Do you think
Speaker 2
there's something to say about the US being a innovator in this space versus other regions? And based on regulation, or is this something that you think is more of the industry parlance? Because I say this because a lot of the industry experts kind of are leaving the US or it's not a friendly place.
Speaker 1
The US is not a friendly jurisdiction. When people used to call me for advice in this space, one of my primary forms of advice was stay out of the United States and do it authentically. Do geo locationing of something? Wine's coming in in a VPN. You don't know where it's from. Then don't do business with them. Nobody took my advice because that would cut their revenues down and they wanted their revenues to go up. So many people would, they'd listen to me and they'd go off and they would do their thing because if they took my advice, they wouldn't get their growth rights, but they wouldn't violate the law. So the trade that they made was, gee, if I have to violate the law and want to get the growth rate that I want, okay, I'll violate the law. Now they're going to pay the consequences
Speaker 2
for that. Talking on a bit of a side note, for the first time we're seeing founders or some of these entrepreneurs actually in jail. So Elizabeth Holmes, I think, has a 11 year sentence, Trevor Milton was just sentenced to four years and others are getting sanctioned. Do you think there is some different context towards the DOJ and the SEC going after these frauds and private markets? Or is it just that these companies are now so much bigger that they would have been public in any other context? No,
Speaker 1
look, fraud is a fraud. Whether it happens the publicly traded company or privately held firm, a fraud is a fraud and the government is doing the right thing. In my view, going after all of these crooks. And in the crypto space, there are so many more crooks to go after. It is mind boggling.
Speaker 2
Yeah, we talked about this last year and there's been a bit of a clean out, but I don't think it's the end either. All right, another topic that is huge in governance is being the politicization of ESG. And this backlash that has been happening for the last two or three years is now strongly expanded into what people refer as DEI, diversity, equity and inclusion. We've seen Supreme Court rulings. We've seen now presidents of universities having to resign. But it's also as something that now has become a very hot political issue. How do you think directors should think about DEI and ESG? Let's separate or we could put it together. But where do you think these trends are going to go into in this year 2024, where there's elections and now there's a massive politicization of corporate governance where before this wasn't such the
Speaker 1
case? Here's the reality in very few people, especially in a university environment like here in this reality. This is a situation where less is more where the dominant thinking among most directors and CEOs is I don't want to say anything about DEI. I don't want to say anything about ESG unless I have to. And given what's happened to directors and CEOs who've gotten out in front of these issues, either pro or con has taught many other CEOs and directors rightly or wrongly to shut up. All right. I'm not going to say anything about DEI unless I have to. I'm not going to say anything about ESG unless I have to. That's the dominant vector in the corner office and in boardrooms today. And I know many people who really don't like that, but I can certainly explain to them why there's a view that that's the right thing for a person with a fiduciary obligation to a corporation, why that's the right path to follow. Stay in the foxhole.
Speaker 2
Interesting.

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