The Block: Crypto’s ‘terrible risk management’ has been ‘washed away:’ Galaxy Digital CEO

Galaxy Digital CEO Mike Novogratz believes most “bad actors” and “terrible risk management practices” in crypto have been swept away.

For companies that have managed to survive thus far, the risk going forward is a lack of capital flowing into the space, with institutional adoption still shy following the slump in cryptocurrencies and various bankruptcies in the industry, Novogratz said during a Barclays Crypto & Blockchain Summit fireside chat aired on Thursday.

“There are plenty of companies that are capital-starved,” which also presents an opportunity in asset management for firms like Galaxy since there’s no shortage of places to apply capital, he said.

The company this week disclosed a $1 billion net loss in 2022 and said that it expects to turn a profit in the first quarter of this year. During an investor call on Tuesday, Novogratz said that the banking crisis and the way the U.S. has abused cheap debt have helped prove the whole thesis behind crypto.

Crypto prices have rallied this year, with bitcoin  — and more recently XRP tokens —taking the lead.

Thinking back to the weekend that culminated in the shutdown of Signature by regulators, Novogratz said that Galaxy was never in a position of not knowing where to put its money. While Signature and Silvergate were “important counterparties,” it had banking relationships with Bank of New York and others.

In fact, Galaxy had its single largest volume days in customer franchise that weekend, Novogratz said.

“We took advantage in lots of ways of that disconnect,” he said. “We provided liquidity where others weren’t willing to provide liquidity. And we made a whole lot of money over that weekend.”

‘Regulatory assault’

Novogratz sees the current regulatory environment as an “assault” on crypto that will drive businesses and people offshore.

“This regulation by 1,000 cuts is damaging,” he said.

The U.S. Securities and Exchange Commission last week said that it was investigating Coinbase and on Monday, the Commodity Futures Trading Commission announced it was suing the biggest crypto exchange, Binance, for allegedly violating U.S. laws. 

Coinbase CEO Brian Armstrong has been vocal about U.S. regulation and has said he’s “happy to go to court” if needed.

“I appreciate Brian Armstrong taking the fight public,” Novogratz said.

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