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Governments around the world may start to clamp down on the use of bitcoin and other cryptocurrencies, the CEO of a top crypto exchange has warned.
A number of officials — from U.S. Treasury Secretary Janet Yellen to European Central Bank President Christine Lagarde — have sounded the alarm about the use of bitcoin for money laundering, terrorist financing and other illegal activities.
“I think there could be some crackdown,” Jesse Powell, CEO of Kraken, told CNBC in an interview. Cryptocurrencies have surged in value lately, with bitcoin hitting a record high price of more than $61,000 last month. The world’s most valuable digital coin was last trading at around $60,105.
Kraken is the world’s fourth-largest digital currency exchange in terms of trading volume. The firm is considering going public through a direct listing — similar to Coinbase — next year after achieving record trading volumes in the first quarter, CNBC reported last week.
Coinbase is set to go public on Wednesday, and could be valued at as much as $100 billion — more than major exchange operators like Intercontinental Exchange, owner of the New York Stock Exchange. Crypto investors are hailing the company’s stock market debut as a major milestone for the industry after years of skepticism from Wall Street and regulators.
Still, Kraken’s chief thinks regulatory uncertainty around crypto isn’t going away anytime soon. A recent anti-money laundering rule proposed by the U.S. government would require people who hold their crypto in a private digital wallet to undergo identity checks if they make transactions of $3,000 or more.
“Something like that could really hurt crypto and kind of kill the original use case, which was to just make financial services accessible to everyone,” Powell said.
Cryptocurrencies like bitcoin have often been associated with illicit activities due to the fact that people transacting with it are pseudonymous — you can see where funds are being sent but not who sent or received them.
There are signs that the use of crypto for nefarious purposes may be falling. Illicit activity accounted for just 0.34% of all crypto transaction volume last year, according to blockchain analysis firm Chainalysis. That was down from roughly 2% a year earlier.
“I hope that the U.S. and international regulators don’t take too much of a narrow view on this,” Powell said. “Some other countries, China especially, are taking crypto very seriously and taking a very long-term view.”
Kraken’s CEO said he feels the U.S. is more “shortsighted” than other nations and “susceptible” to the pressures of incumbent legacy businesses — in other words, the banks — that “stand to lose from crypto becoming a big deal.”
“I also think it might be too late,” Powell added. “Maybe the genie’s out of the bottle and just trying to ban it at this point would make it more attractive. It would certainly send a message that the government sees this as a superior alternative to their own currency.”
The U.S. isn’t the only country considering strict new rules on crypto. In India, for example, the government is considering a law that would ban cryptocurrencies and penalize anyone holding or trading them.