More than a year has passed since the notable Terra, FTX, and Celsius collapses in 2022, and the cryptocurrency industry has faced numerous challenges since then.
Industry leaders are now discussing the crucial role of crypto rating agencies in managing risks within the crypto sphere.
In 2022, Ben Goertzel, the CEO of SingularityNET, a decentralized artificial intelligence (AI) firm, argued that rating agencies could play a more significant role in rebuilding trust in crypto than regulators.
As we enter 2024, Goertzel remains skeptical of regulatory efforts aimed at bolstering confidence in the crypto space.
He expressed his lack of faith in regulatory agencies, stating, “Nothing that the world’s regulatory agencies have done since 2022 has increased my faith that they are going to be able in practice to do more good than harm for customers or service providers in the crypto space.”
However, Goertzel believes that transparent, crowdsourced, and intelligently aggregated rating mechanisms could significantly benefit the crypto landscape.
He highlighted the advancements in AI technology, which now make it easier to generate customized summaries of the reputations of various entities in crypto using raw data and reports from diverse sources.
Goertzel also pointed out the United States regulator’s handling of the FTX case as evidence that special laws for crypto fraud may not be necessary.
He argued that existing laws against fraud can effectively be applied to arrest “crypto fraudsters,” similar to individuals involved in other fraudulent activities.
While he doesn’t believe that rating agencies could have prevented the FTX collapse, he suggests that they could have “alerted customers to the numerous red flags observable in advance.”
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Anastasia Ulianova, co-founder of the crypto ratings platform Aria, acknowledges the limitations of rating agencies in preventing collapses like FTX.
Ulianova emphasized that rating agencies can “raise red flags” when the risk associated with a particular crypto exceeds its performance, but they cannot predict collapses.
She stated, “A rating can only tell you how much risk you are taking. It is not a certain prediction of an upcoming collapse.”
Despite these limitations, Ulianova believes that rating agencies can still play a crucial role in helping investors assess the risk-to-reward ratio of tokens.
This information can aid investors in determining whether the expected returns justify the associated risks.
She also emphasized that Aria’s goal as a rating agency is to “legitimize the place of crypto assets in a traditional investment portfolio.”
In summary, crypto rating agencies are being viewed as a valuable tool in the cryptocurrency industry to assess risks and provide investors with information needed to make informed decisions.
While they may not prevent collapses, they can help individuals navigate the complex crypto landscape and make more educated investment choices.
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