Once burned, twice passionate: Scaramucci does not give up on cryptocurrencies

Scaramucci, a Wall Street veteran, is a Davos institution: holding court in hotel lobbies, talking to anyone who stops him on the street, and handing out 100-point red wines at one of the week’s hottest parties. For several years, Scaramucci was also the most valuable thing of all to the nervous global elite: a translator for Trump.

This year he came to the Swiss Alps to save his bacon. Sam Bankman-Fried, the now-indicted former head of FTX, invested nearly $45 million in Scaramucci’s SkyBridge Capital before the deal collapsed and Bankman-Fried was arrested in the Bahamas. This represented 30 percent of SkyBridge’s business.

Scaramucci does not give up on cryptocurrencies and in Davos he argued to legislators and investors that the market is still strong.

“There are skeptics. But what don’t they trust? Ultimately, they don’t trust people,” Scaramucci said. “If you take someone like Sam – who I was very close friends with – that’s a betrayal of trust and that’s a betrayal of friendship. Good fraud can fool people. [But] the technology is so wonderful. You can trust that I’m sending money to your wallet via the blockchain, which is kind of this impregnable system.

This is a common refrain here among cryptocurrency evangelists on the Davos Promenade: Fraudsters are the problem, not the underlying technology or the lack of regulation around it.

A tough sell

EU Finance Commissioner Mairead McGuinness isn’t buying it. For many people, “cryptography is like a religion. You either believe it or you don’t believe it,” she said. McGuinness insisted that she herself would remain “agnostic”.

Following the downfall of Bankman-Fried, once considered the star and industry leader, cryptocurrency executives here are fighting for the spotlight to try and prove that they they are the ones who can lead the industry out of the mess and into the future.

Each of them offers different approaches to get things back on track, from proposing new regulation to rebranding as a blockchain company, to launching new slogans about mathematics that enable “trust without trust”.

Vishal Kapoor, head of strategy and head of business development for cryptocurrency Chia, said rebuilding trust starts with acknowledging the scale of the problem. He said the industry fell for the oldest trick in the book: “We put a trust in a person who was promising us snake oil or, in this case, some crypto tokens.”

Kapoor wants to reframe cryptocurrency conversations about how to improve technology and set aside the narrative about rebel gangs clashing with the government-backed currency party.

In this worldview, blockchain is the next step in the evolution of internet technology, rather than a tool for evading scrutiny and regulation.

Davos crypto-backers are also linking advances in blockchain technology that are addressing a major concern of regulators: the energy demands of many cryptocurrencies. (Some can use 5 million times more energy than others.)

Paolo Tasca, executive director of the Center for Blockchain Technologies University College London, which published a study published last week on the comparative energy consumption of blockchain networks, said that Hedera’s global network can run on less energy than a normal one uses. family. The finding surprised even Hedera executives with whom POLITICO spoke this week.

Trust the technology

The question is whether all that politics will be enough to kick-start a renewed wave of investment and support for cryptocurrencies, and whether the public can trust cryptocurrency leaders.

Their message goes something like this: the technology is safe, reliable, and innovative. You can trust us.

For Scaramucci, the trust message is one he’s trying to address head-on, given the complications that arose from his relationship with Bankman-Fried and his short stint in the Trump administration (he was removed from office after 11 days). . But, he said, he’s someone who thinks he can win.

“Now that Trump is no longer in office, I’m back in favor,” he said with a laugh.

In an effort to build trust, Scaramucci is trying to prove in panels and side events this week that it’s still smart — and profitable — to invest in cryptocurrencies. He announced that his company is betting large sums of money on Bitcoin in 2023.

“I’m old enough to remember the dotcom bubble burst and many of my friends gave up on tech stocks. Well, 22 years later, upon reflection, it was a bad decision,” she said.

Maybe some rules aren’t so bad after all

But building trust also requires supporting the idea of ​​regulation, Scaramucci said.

“We must regulate against excesses and greed,” he said. “I can’t tell you what the regulation will be. I predict it will be onerous.”

McGuinness, the EU regulator, said regulating cryptocurrencies is essential “not because we’re worried today that it will impact financial stability, but because it might, and we don’t want to see it.”

McGuinness has young and new cryptocurrency investors in mind as it considers further regulatory steps. “It’s not that I want to protect them, because protection sounds like I’m telling them what to do. I want to alert them to the reality of cryptocurrencies,” he said.

Scaramucci said he discussed a potential regulatory framework in multiple conversations with members of the US congressional delegation in Davos.

Faryar Shirzad, chief policy officer of Coinbase, a self-custodial cryptocurrency wallet, said the US needs to improve regulation.

“There are two forms of dialogue going on: one is the US version and the other is the global version,” he said. “The US version is heavily influenced by the extraordinarily fragmented nature of the US regulatory system. In every other country in the world – Japan, Hong Kong, EU, UK – there is one market regulator and one banking regulator”.

But regulatory frameworks won’t necessarily ensure that companies implement rigorous internal governance.

Coinbase, despite being one of the most regulated crypto firms, has encountered issues with compliance. Earlier this month, the company agreed to settle with the New York State Department of Financial Services for $50 million after regulators ruled it did not conduct background checks before customers opened accounts. . The company has agreed to strengthen its compliance program.

“There were historical deficiencies in the systems that we had built that we worked very, very hard to update,” Shirzad said.

Invoking Americana

For now, the crypto parties continue, at least in Davos.

Forum-goers this week mingled amid billboards urging them to “build everyone’s internet,” while drinking espresso martinis shaken with organic, locally sourced ingredients. The Filecoin Sanctuary, a physical meeting space hosted here by the Filecoin company, was located in a local church that had been transformed into a blockchain sanctuary.

Down the street from the main Davos convention center, a large billboard showed Benjamin Franklin behind an inscription that reads, “Benjamin meets Blockchain.”

It’s an advertisement for a particular cryptocurrency company, Circle. But it’s also an ever-present reminder of the message the crypto crowd is trying to get across: the founding fathers would have believed and trusted cryptocurrencies. So you should too.

Scaramucci tweeted a photo from the show: “Good to see Circle educating people in Davos!”

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