Crypto Leaders Advocate for Rating Agencies as Risk-Mitigators in Crypto Industry
Summary:
This article discusses the role of rating agencies in mitigating risks within the cryptocurrency industry. Leaders, like Ben Goertzel, CEO of SingularityNET, believe rating agencies can rebuild trust in cryptocurrency more effectively than regulators. Rating agencies could leverage AI technology to produce customized summaries on the reputations of various cryptocurrency entities. The conversation on this topic grew after the 2022 Terra, FTX, and Celsius collapses. Despite the potential benefits, the limitations of rating agencies are also highlighted, particularly in their inability to predict market collapses.
More than a year following the notorious 2022 collapse of Terra, FTX, and Celsius, as well as numerous subsequent industry crises, leaders are discussing the potential of crypto rating agencies to reduce risk in the world of cryptocurrency. Ben Goertzel, the head of decentralized AI firm SingularityNET, suggested in 2022 that rating agencies could be more successful than regulators at restoring confidence in crypto. Today, in 2024, Goertzel reveals to Cointelegraph that he has yet to see significant regulatory measures that enhance his trust in crypto protection. He stated: “None of the measures implemented by global regulatory bodies since 2022 have bolstered my confidence that they can effectively provide more benefits than harm to consumers or service providers in the crypto sector.” However, he believes that "clear, crowdsourced, and intelligently consolidated rating systems could significantly improve the crypto environment." Furthermore, Goertzel notes that advancements in AI technology can now facilitate conveniently personalized summaries of various crypto entities' reputations, utilizing raw data and inputs from diverse sources. According to Goertzel, cases like FTX's management by US regulators highlight that no separate laws are required to combat crypto fraud, as existing fraud laws can be employed to apprehend “crypto defrauders,” much like any other fraud performers. Although he does not think that rating agencies could have prevented the FTX catastrophe, he does believe that they may have “signaled customers about the several early warning signs.” In relation, Celsius transfers $125M of ETH to exchanges as FTX and Alameda unload. Anastasia Ulianova, a co-founder of crypto ratings platform ARIA, concurs that rating agencies have limitations in handling situations like FTX's collapse. Ulianova noted that while rating agencies can "highlight risks" when the hazard associated with a certain crypto exceeds its performance, they are unable to forecast collapses. She clarified, “A crucial point is a rating only indicates the amount of risk involved. It does not guarantee a future collapse.” Nonetheless, Ulianova believes that rating agencies can go beyond risk assessment and project legitimacy evaluation, aiding investors in estimating a token's risk-to-reward ratio to determine whether the prospective returns are worth the risks. The co-founder further noted that ARIA's aim as a rating agency is to "validate crypto assets' status in a conventional investment portfolio." Magazine section: Caroline Ellison discusses the FTX-Binance feud, SEC declines to contest Grayscale BTC ETF: Hodler’s Digest.
Published At
1/15/2024 12:41:00 PM
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