Crypto markets are still under pressure after the long July 4th weekend, and the volatility continues to impact firm after firm. Lenders are getting hit especially hard, and some are considering buying one another in order to rescue what small semblance of business could be left. Meanwhile, the EU last week finally agreed on a regulatory framework for exchanges and stablecoin issuers. Josh Goodbody, COO of Qredo, joins Closing Bell to discuss this week's developments and more.  

Closing Bell

What to Watch in Crypto This Week: Insolvency Questions, Firm Consolidation, EU Regulation Impact

And as banks warned that a crypto crash could impact traditional markets and firms approach insolvency. Some regulation is being pushed through. So last week, the european union finalizing an agreement on a regulatory framework for crypto exchanges and stable coin issuers with the aim of protecting crypto investors. But as firm after firm runs into financial issues, is it enough joining us now? Is josh. Good body ceo of credo, firm focus on cyber security and Blockchain technology josh your thoughts on eU regulation. Do you think it's enough to protect investors as the crypto market remains super volatile? Thanks for having me ken, good to be here. The development of of Mika is a very welcome one from an industry perspective, seeing welcome clarity on an understanding at the regulatory level of what a good and effective, comprehensive regulatory framework can look like giving certainty to the industry, to builders in the european space. In fact, the companies in in the global market looking to enter the european market, giving them comfort and certainty on what it is expected of them at the regulatory level to enter such a large market. That is the european union, is this going to protect consumers in the end is a great question. And I think it's one that we will be able to answer in the fullness of time, but it's certainly a welcome step in the right direction to clarify what kind of expectations regulators in the european union will have on businesses that operate crypto asset services and simple things like things like capital reserves, things like infrastructural integrity, having the right people running the company and making sure that there's good governance in the way that these businesses operate. These are small but important measures that will create confidence in the industry and in the long run, ensure that businesses that operate and offer different crypto asset services are doing so in the right way with their consumers and their users in mind, and maybe that's what's been missing in the industry today. A real focus on the consumer and protecting consumer interests. What I would say though, is that this is a very early industry and in early industry comes innovation and certain elements of risk. And these regulatory frameworks will certainly take us in the right direction in building a stronger, more robust crypto asset industry in the european union. Now josh. For those of us who don't know why Is it such a big deal that crypto lenders are pausing withdrawals? Yeah, I think it's one of those things that when it happens, it wakes people up that their assets are no longer there's you deposit an asset to a service provider such as Celsius or block fire. And what that means in practice from a regulatory and legal perspective is it ceases to become yours. You are no longer the owner of that asset. You may have a right to claim that asset at some point, you're handing over the title of that to that service provider and the way that that service provider then uses that asset is it goes and takes a series of trades or bets or comes to a commercial arrangement with another party to generate a yield to generate a return on those assets. And in turn, it will pass through some of that yield or return to you the depositor. And what we're seeing in such a volatile market, where crypto assets in particular have plunged in in price recently is that these directional bets that lenders are taking, where they assume that they're able to, for example, repay certain positions they have on platforms are all predicated on a certain type of price movement. But when the price moves outside of that rather narrow band, it has unforeseen consequences and risk management becomes a real concern. And so service providers have had to pause withdrawals to be able to make a contingency plan as to how they're going to return assets that have been placed into third party platforms or have been the the asset used to enter into a trade with various third parties, how they're going to be able to meet all the withdrawal demands that are on them as a result now, of this market volatility. So this is pretty, pretty dire market conditions we've had recently and it's quite unprecedented in in recent very recent crypto asset industry history and it has caused a number of stress tests and risk michigan's to potentially fail. And we're seeing service providers meeting the challenge by actually pausing withdrawals and trying to figure out on the fly how they're gonna meet withdrawal requests. Now, some firms obviously pausing withdrawals. There's other firms that are running into trouble and there's firms that want to buy other firms so its consolidation of crypto companies to be expected as the market remains so volatile. This is something that typically happens in a distressed industry or market where those that have weathered the storm better will typically want to either firm up their position by acquiring distressed assets or looking for an opportunity to buy assets and infrastructure. It could even be technology and teams at a a bit of a fire sale price. So firms that have done well out of this or have maintained a robust financial position and have the capital balance. She to be able to carry out mergers and acquisitions or buy and build strategies are going to be on the hunt. And we've already seen some of this activity taking place. F. T. X in particular has been an example of a firm that has been very proactive in hunting out assets that are perhaps much cheaper than they would have been six months ago. And this is a natural consequence of the state of the market. It may be the very beginning of this kind of market activity, a phase of consolidation and mergers and acquisitions are to be expected in a market like this and it will certainly be welcome relief for many of the consumers out there that are looking to see some of the perhaps more startup service providers that they've been using short up with the backing of slightly larger digital asset services groups like F. D. X, like finance and other larger exchange players in the space that are clearly on the hunt. Now, we mentioned EU regulations. So what sort of regulation do you think needs to happen here in the US. Like the U. S. Could do with some welcome clarity on how crypto assets are to be regulated in a federal manner in a holistic way that enabled the industry to build with confidence. What we've seen to date in the U. S. Is this patchwork regime of regulatory requirements done at a state level, with very little guidance from federal agencies or federal authorities around what expectations are set at this nationwide level. And that's caused a lot of complexity between different regulators. The sec claiming jurisdiction in certain respects, and talking about potentially having jurisdiction in other scenarios where perhaps a regulator like the zero cc. Might step in or the CFTc even so welcome clarity at a federal level, would create a huge amount of confidence and stability for folks building in the crypto asset industry in the US and taking a leaf out of the european union's approach, which creates a one size fits all policy for the industry within a certain region. I one size fits all policy for the entirety of the US would certainly solve some of the complexities and confusions that arise with the current regime that is quite fractured and very different on a state by state basis. So where do we go from here? When can the crypto market stabilize? That's the magic question. If we look back at the previous bear market in 2020, we were all entering doom and gloom predicting a prolonged period of of of market distress and that bear market only lasted six months. I would be foolish to be predicting a time period for this. But what I can say is the overall foundations of the crypto acid industry are much stronger In 2022 than they were in the last bear market. We have seen a caliber of investor and company come into the crypto asset markets building for the long term. So what we're seeing today has various routes in the wider economy alongside wider macroeconomic events happening. The war in Ukraine, you name it coronavirus or has an impact on this. When we will emerge from this rut is a very challenging question to ask answer in much detail. But I think we are looking at a robust industry that has all the foundations for future growth when we will emerge stronger from it. And when that will translate into upwards price action is very much an open question. Alright, josh. The ceo of credo josh. You certainly know your crypto. Thank you so much for being on the show and sharing your expertise.