BitGo CEO Backs Crypto Oversight After Galaxy Digital’s $200M Settlement

Galaxy Digital’s $200 million settlement with the New York Attorney General (NYAG) over allegations of unethical promotion of Luna cryptocurrency has sparked a call for increased regulation from BitGo CEO Mike Belshe.

• BitGo CEO supports crypto regulation
• Galaxy Digital settles for $200M over Luna promotion
• Luna and TerraUSD collapse in 2022

Mike Belshe, CEO of BitGo, a leading cryptocurrency custody and security firm, has thrown his support behind the need for tighter regulation in the cryptocurrency industry following Galaxy Digital’s hefty $200 million settlement with the New York Attorney General. The settlement stems from accusations that Galaxy Digital, led by CEO Michael Novogratz, engaged in pump-and-dump schemes with the Luna cryptocurrency. Pump-and-dump refers to artificially inflating the price of an asset through false or misleading statements, then selling it off for a profit. Galaxy Digital had promoted Luna as a long-term investment while simultaneously selling off their holdings immediately after vesting, a practice Belshe labeled as unethical.

The Luna cryptocurrency, developed by Terraform Labs alongside its stablecoin TerraUSD, experienced a dramatic collapse in mid-2022, wiping out over $40 billion in market value. This event, known for its severe price fluctuations, underscored the volatility inherent in the cryptocurrency market and highlighted the potential for manipulation. The NYAG’s intervention resulted in a settlement requiring Galaxy to pay the $200 million penalty in installments until 2028, with a $166 million legal provision set aside to cover the fine.

Belshe didn’t hold back in his criticism of Galaxy Digital’s actions, stating, “Selling tokens immediately after they vest while publicly promoting them as a long-term hold is unethical.” He warned that such misconduct could lead to overregulation if not addressed promptly, damaging the industry’s reputation. Despite his strong stance against Galaxy’s tactics, Belshe acknowledged Novogratz’s contributions to the industry, reflecting a nuanced perspective on the matter.

The Luna debacle serves as a stark reminder of the risks associated with cryptocurrencies and the need for regulatory oversight. Belshe’s call for regulation is rooted in the belief that sufficient oversight is the most effective way to address industry problems that might result in overregulation. He advocates for a balanced approach that separates custody from exchange functions to mitigate risks, drawing comparisons to historical exchange failures like Mt. Gox.

The settlement with Galaxy Digital is a significant milestone in the ongoing debate over regulation in the cryptocurrency industry. It highlights the urgency for a regulatory framework that prioritizes safety and integrity without stifling innovation. Belshe’s support for enhanced regulation reflects a growing sentiment among industry leaders who recognize the necessity of ethical practices and investor protection.

As the industry grapples with these challenges, the path forward involves finding a delicate balance between fostering growth and maintaining trust. The lessons learned from the Luna collapse, coupled with Belshe’s stance, will undoubtedly influence the future of cryptocurrency regulation.

Here are some key takeaways and questions to consider:

• What is the stance of BitGo CEO Mike Belshe on cryptocurrency regulation?

  Mike Belshe supports enhanced regulation in the cryptocurrency industry, believing it is necessary to address industry problems and prevent overregulation.

• What were the allegations against Galaxy Digital that led to the $200 million settlement?

  Galaxy Digital was accused of engaging in pump-and-dump tactics with the Luna cryptocurrency, promoting it as a long-term investment while selling off their holdings immediately after vesting.

• How did the market value of Luna and TerraUSD change in mid-2022?

  In mid-2022, the market value of both Luna and TerraUSD declined sharply to almost nothing, resulting in a loss of over $40 billion.

• What are the potential consequences of unethical practices in the cryptocurrency industry according to Mike Belshe?

  Belshe warns that unethical practices could lead to overregulation and damage the industry’s reputation if left unchecked.

• How is the $200 million penalty being paid by Galaxy Digital?

  The $200 million penalty will be paid in installments until 2028, with a $166 million legal provision set aside by Galaxy to cover the fine.

“Belshe claims that the foundation of his regulation argument is based on the belief that sufficient oversight is the most effective way to address industry problems that might result in overregulation.”

“BitGo’s CEO criticized the company’s pump-and-dump tactics, stating that selling tokens immediately after they vest while publicly promoting them as a long-term hold is unethical.”

“He said that whether or not it was an overreach of the law, and that kind of behavior damaged the reputation of their entire industry.”