Davos 2023: Crypto Is Down, but Not Out
DAVOS, Switzerland – The crypto industry showed up in force at the World Economic Forum’s annual conference in May 2022.
Eight months, numerous bankruptcies and a major collapse later, the industry is still present in Davos, Switzerland, but with a more subdued presence. The Promenade – the road outside the main Congress Centre – still has a number of crypto companies advertising or operating “houses,” the lounges, meeting rooms or event stages meant to introduce Davos attendees to their projects.
But, there are far fewer companies present. Those that remain include Circle, the Global Blockchain Business Council, Casper Labs and the Filecoin Foundation. Where, in 2022, crypto panels were everywhere, in 2023 the crypto industry blends seamlessly into the major financial and tech giants around them. Gone are the free bitcoin-themed pizza stalls and high-volume advertising to the casual passerby.
“What a difference eight months makes,” said Ripple Senior Vice President Brooks Entwistle. “You couldn’t walk more than five or 10 feet without seeing a crypto house [in 2022].”
The market may have some role here. Entwistle said that many of the crypto projects advertising or operating houses in 2022 likely booked them well in advance, considering the forum’s annual meeting was originally set for January 2022 but was delayed due to a spike in COVID-19 cases worldwide. In other words, these companies likely booked their houses and advertisements while the crypto industry was still in its last bull market.
In contrast, 2023 bookings likely occurred after prices began to fall, leading to tightened budgets that may account for the much smaller presence this year.
“Since we were here in May, we’ve seen a lot of turmoil,” Entwistle said. "There's no NFT galleries ... we're here to work and have conversations."
Those who remain aren’t daunted. Marta Belcher, the Filecoin Foundation’s head of policy, told CoinDesk that she believed there was less noise at the event this year, allowing for more conversations focused on the actual technology at hand.
“It’s too soon to tell what the reception is like, but the responses [so far] has been encouraging,” she said.
As in years past, crypto has a presence within the main forum’s own conference, with a number of panels addressing different aspects of the industry – but specifically focused on a narrow set of topics: central bank digital currencies, digital identities, tokenized economies and the like.
The official conference kicks off Tuesday morning in Switzerland. Unofficially, the crypto industry began holding its own events on Monday, with Circle, the Global Blockchain Business Council, Casper Labs and the Filecoin Foundation all hosting panels addressing everything from FTX (Sam Bankman-Fried is a “fraud,” alleged Skybridge Capital founder Anthony Scaramucci) to whether central bank digital currencies make sense (“I actually don't think central bank digital currencies are the solution,” said historian Niall Ferguson).
What may be more unexpected is the fact that regulators and policymakers are actively participating in these panels. Multiple United Nations representatives spoke about their work in a panel on blockchain use by public institutions hosted by the GBBC, alongside Commodity Futures Trading Commission commissioner Christy Goldsmith Romero and Johannes Duong, of the Oesterreichischen Nationalbank (Austria’s central bank).
Advit Nath, of the International Fund for Agricultural Development (IFAD), a United Nations agency, said his group was actively using blockchain tools to track the flow of donated funds in certain regions, while Goldsmith Romero praised the fact that blockchains inherently record every transaction, making it relatively easy for her agency to establish whether it has jurisdiction over certain transactions and crimes and just use market surveillance tools in general.
The events hosted by crypto companies are also seeing solid attendance. Casper Labs had a packed house on Monday evening, and a reception hosted by Filecoin was standing room only.
And for all that, it's unclear just what the industry can take away after this week. Entwistle told CoinDesk that he and his colleagues were mainly at the conference to meet with potential clients.
"Our approach here has been to be tactical about meetings," he said, part of the reason why Ripple doesn't host a house of its own.
Jonathan Dotan of Starling Labs echoed Entwistle's comments, saying that at least from his perspective, "very little has changed."
Starling Labs doesn't offer anything resembling financial services, Dotan said, and so hasn't had to deal with the fallout from the crypto crash the way other companies may have.
And Davos is, after all, largely a forum to make connections and find possible investors or customers.
Of course, the FTX-shaped elephant in the room also likely has had an impact on crypto's relatively toned-down presence at Davos this year.
Conversations are being hijacked by discussions about FTX's collapse, and panels are at the least touching on the exchange's fall, Entwistle said.
The industry was sent reeling after FTX fell apart, and the amount of interplay between different now-bankrupt crypto lenders sparked fears of widespread contagion. So far, this contagion has been limited to within the industry itself, though regulators have warned in the past that contagion between crypto and the broader financial market is an area of concern.
Circle CEO Jeremy Allaire, who spoke alongside Ferguson on a panel hosted by the Financial Times, said the industry’s path to recovery included differentiating between good and bad actors.
“We need to differentiate speculative assets that don't have any real utility or value from digital assets that are designed to have utility, we need to differentiate between the regulated and the unregulated,” he said.
A lack of guardrails will continue to prevent more traditional institutions from considering engaging with cryptocurrencies, said New York Stock Exchange President Lynn Martin.
“Look at the issues in the last few months in particular, with the FTX bankruptcy… More traditional financial models… have been shown to be the beacons of transparency,” she said. “We need the regulators to tell us what the guideposts are. What the regulated framework is to bring them into more traditional structures, and ways of execution.”
Goldsmith Romero, speaking on her panel, said it was also contingent on Congress to pass legislation clarifying the roles regulators may hold.
The Davos contingent of the crypto industry may provide a snapshot glance at whether this differentiation will occur.
Scaramucci, speaking on his panel, said he would “probably make that mistake” of trusting someone like FTX founder Sam Bankman-Fried again.
“I’m not going to stop the risk-taking,” he said.