Roubini calls crypto ‘corrupt gambling’ and rips proof of reserves
Nouriel Roubini is not a fan of cryptocurrency exchanges. And he’s absolutely unfazed by the “proof of reserve” idea that Binance and other crypto players are touting in the wake of FTX’s epic collapse.
On Friday morning, Binance announced the release of its Proof-of-Reserve system, starting with Bitcoin. It wrote on its website: “Following our recent announcement outlining our commitment to transparency, Binance is releasing its Proof of Reserves (PoR) system, which is the next step in our effort to create transparency about user funds. Rollout of this feature will begin with BTC first, with more tokens and networks being added over the next few weeks.”
Same day, Roubini tweeted, “Crypto is corrupt gambling where the house always and systematically leads the retail suckers getting rect. Over 100 million jerks are being rectified by a bunch of crypto thugs worldwide.”
Earlier this week, he tweeted, “Proof of Reserves (PoR) is the gimmick used by crypto exchanges/lending platforms to pretend that their customers’ funds are safe. Because these assets are in the custody of the exchange, they are on its balance sheet and clients’ assets are not bankruptcy-proof. These are banks, NOT stock exchanges!”
He has also retweeted posts from others including one on Saturday from Bitfinex reading: “Exchanges are trying to do what is called proof of reserve to show they have client funds. Remember folks, proving reserves is meaningless. Exchanges borrow from each other to show the crypto. That’s why you’re seeing “accidental” transfers of hundreds of millions of dollars.”
“Totally corrupt” cryptocurrency industry
Roubini also called the cryptocurrency industry “totally corrupt”. speak at Abu Dhabi Finance Week on November 16th. He asked Emiratis to expel Binance exchange founder Changpeng “CZ” Zhao — a UAE resident who is licensed to operate in the country — and compared him to disgraced FTX founder Sam Bankman- Fried .
“He’s banned in the UK, he’s under investigation by the US Department of Justice for money laundering … and he’s here on this stage, residing in this country,” Roubini said. “He’s a walking time bomb, he should be expelled from the country.”
CZ suggested earlier this month that systems to prove reserves could reform the crypto industry and restore investor confidence by offering a new level of transparency that would prevent the kind of patchy accounting that has contributed to FTX’s sudden implosion .
“That’s going to be absolutely the focus going forward, which is right,” he said. “We learned from our mistakes”
Even before the FTX collapse, Binance was the world’s largest crypto exchange. Now its position looks even stronger, but the FTX collapse has cast a shadow over the entire cryptocurrency space.
Roubini has a reputation on Wall Street for being a bit of a pessimist. He accurately predicted and recently authored the financial crisis that followed the US housing market collapse in 2007 The age of mega threatswhich outlines 10 major economic problems facing the world.
In September, he warned that the US would be hit hard by a recession in 2023 that would also devastate financial markets. “It’s not going to be a short and shallow recession,” he predicted. “It’s going to be hard, long and ugly.”
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