Caitlin Long: I want leverage to disappear from the crypto market

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The CEO of Custodia Bank believes that regulators should have regulated the crypto industry long ago and shut down companies that borrow capital.

Caitlin Long said in an interview that back in 2018, regulators were obliged to crack down on scammers and approve honest crypto companies and products:

“They [regulators] didn't give the go-ahead to good players like they needed to. And also didn’t go after the bad guys like they should have.”

The head of Custodia Bank noted that GrayscaleBitcoin Trust (GBTC), one of the few Securities and Exchange Commission (SEC)-approved crypto funds, has “brought enormous capital to hedge funds, crippled the industry, and destroyed its value.” According to Long, in this situation, due to the imbalance between supply and demand, the price of GBTC was much higher than the market price, since the fund attracted significant leverage.

Retail investors bought GBTC shares, butonly until the SEC has approved competing products. As competition emerged, funds like GBTC began trading at a discount to their net asset value.

Caitlin Long commented on Grayscale Bitcoin Trust's decision to file a lawsuit against the SEC after the commission rejected Grayscale's application to convert GBTC into an exchange-traded fund:

“My gut feeling is that the SEC haspeople who wish this had never happened. Because it took them over six years to greenlight another, competing product. Grayscale has been alone in the market for a long time, and many investors have been hurt by its actions, as has the entire industry.”

Long is confident that it would be useful for the industryif leveraged companies disappeared and the industry was rebuilt around a non-leveraged business model.

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Although Long can't pinpoint exactly howwill be the next step of the SEC, she suggested that the situation in the market is caused by the decisions of regulatory authorities. She cited the story of the credit company Genesis Global Trading, which&nbsp;suffers&nbsp;nine-figure losses due to its exposure to the cryptocurrency hedge fund Three Arrows Capital, which is now&nbsp;at risk&nbsp;of collapse.