In November 2022, shortly after the collapse of FTX, popular economist Nouriel Roubini accused the cryptocurrency market and its key players of engaging in illicit activities. While speaking on a panel, the scholar said there are 7Cs in crypto; concealed, corrupt, crooks, con men, criminals, and CZ, referring to former CEO of Binance, Changpeng Zhao.
In his speech, Roubini revealed that he’s surprised to still see CZ moving freely following the collapse of the then-second-largest cryptocurrency exchange, FTX. The expert emphasized why regulators around the globe must keep a close watch on the industry and, most significantly, Changpeng Zhao.
Background to the Crisis that Rocked Crypto in 2022
Recall that on November 11, FTX filed for Chapter 11 bankruptcy protection, indicating that it had more than 100,000 creditors and liabilities between $10 billion and $50 billion. More than 130 different companies were part of the proceedings, and the impact of FTX liquidation wiped more than $7 billion from the cryptocurrency market.
Furthermore, the cryptocurrency market suffered heavily from the issue, as the price of BTC plunged below $17,000 for the first time since 2020. Meanwhile, when Nouriel Roubini made the speech in November 2022, Changpeng Zhao was very influential as the CEO of the world’s largest cryptocurrency exchange by trading volume.
Roubini highlighted some of the legal issues surrounding CZ and Binance, pointing to how regulators in the UK banned the exchange from operating in the region. Also, the economist pointed to how the United States Department of Justice is investigating the Binance boss for money laundering.
In less than a year, Roubini’s warning came into play after Changpeng Zhao resigned as the CEO of Binance. In November 2023, CZ pleaded guilty to money laundering charges in the US while receiving a 4 months jail sentence.
CZ admitted to prioritizing the growth and expansion of Binance over compliance with the anti-money laundering standards of the Financial Crimes Enforcement Network. Consequently, CZ agreed to pay a fine of $50 million and another $4.3 billion fine from Binance.
Eventually, CZ abandoned his role as the CEO of Binance, leaving Richard Teng to take over. Following the criminal conviction of Changpeng Zhao, critics pointed out how the words of Roubini came to pass. More so, the situation rebirthed questions on the 7Cs of Nouriel Roubini and whether the cryptocurrency market is genuinely fraudulent.
Is Nouriel Roubini Right?
To an extent, the words of the economist don’t fully describe the cryptocurrency market. Instead, it only highlighted one of the key weaknesses of the industry.
The decentralized posture of the digital assets sector made it difficult to establish a stern security protocol that could ward off bad actors. Criminals are leveraging the core strength of cryptocurrency to allow users to move funds anonymously.
By that, bad actors now use cryptocurrency for various illegal reasons like money laundering, scams, etc. Also, the cryptocurrency sector, despite hitting $3.7 trillion in market capitalization, is still in a nascent stage, and the majority of the markets are not regulated.
The FTX empire collapsed due to mismanagement of users’ funds, a situation the presence of regulation could have prevented. Without proper regulation, the 7Cs of crypto, as depicted by Nouriel Roubini, will continue to dominate the market, exposing investors to various risks.
Similarly, the sector’s advancement will also play a part in limiting bad actors. For instance, there are emerging blockchain auditing firms that audit the protocol of a project to attest to its credibility.
Thanks to their auditing expertise, these firms help identify projects with issues in their protocol, correcting them before hackers can capitalize on them. Likewise, they also help in flagging scams and fraudulent projects, protecting investors against rugpull.
While the prevailing situation may support Roubini’s assertion, the cryptocurrency market still offers many opportunities, attracting investors and bad actors alike. Combining the mentioned factors, the cryptocurrency market can push away bad actors that could thwart the industry’s progress.
Conclusion
The cryptocurrency market without a check will continue to reflect the concerns of Roubini and other enthusiasts. With proper regulation, industry advancement, and the collaborative effort of all investors, the cryptocurrency market will be free from the dominance of bad actors.
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