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PRIVATE KEY

A cartoon space cat demonstrates why Wall Street is skeptical of crypto exchanges

CryptoScamHub/Screenshot
Not your average crypto kitty.
By Matthew De Silva
Published Last updated This article is more than 2 years old.

Craig Wright, an Australian computer scientist, has repeatedly drawn the ire of the cryptocurrency community by claiming to be Satoshi Nakamoto, the creator of bitcoin. He’s gone as far as threatening legal action against people who question his unsubstantiated claim. This time, though, it appears Wright may have overstepped.

After a pseudonymous Twitter user named Hodlonaut called Wright a “fraud,” the litigious Australian threatened to sue for defamation and issued a $5,000 bounty for Hodlonaut’s personal information. Wright’s plan backfired almost immediately, as the broader crypto community jumped to defend the cartoon space cat. Elizabeth Stark, CEO of Lightning Labs—which is developing a system to make bitcoin payments faster—started a legal defense fund for Hodlonaut, and many Twitter users changed their profile pictures to show support.

For Wright, the fallout hasn’t stopped there. Regardless of whether he created bitcoin, Wright did create a bitcoin offshoot called Bitcoin Satoshi’s Vision. Up to now, the unpopular token which is essentially a bitcoin replica—has been listed on some large exchanges, including Binance and Kraken. However, Wright’s recent behavior caused both trading platforms revisit their listing decisions. “Craig Wright is not Satoshi,” Changpeng Zhao, CEO of Binance, declared on Friday. “Anymore of this sh!t, we delist!”

“I normally don’t like get involved in debates, pick sides, etc. But this is going too far,” Zhao added.

Binance announced Monday that it will delist Bitcoin SV on April 22. “[W]e periodically review each digital asset we list to ensure that it continues to meet the high level of standard we expect,” the exchange explained. “When a coin or token no longer meets this standard, or the industry changes, we conduct a more in-depth review and potentially delist it. We believe this best protects all of our users.”

Binance considers a myriad of factors during reviews. For Bitcoin SV, the exchange told Quartz it found “evidence of unethical / fraudulent conduct” and failure to “contribut[e] to a healthy and sustainable crypto ecosystem.”

Kraken followed suit on Wednesday. The exchange will stop accepting Bitcoin SV deposits April 22 and trading will cease April 29, while withdrawals will continue until May 31. In a poll of 70,000 Twitter users, Kraken found overwhelming support for delisting the token.

While Craig Wright is almost universally detested by the crypto community, the delisting of Bitcoin SV is a reminder that exchanges can pick winners and losers. Functionally, cryptocurrencies exist on independent networks, but it’s absolutely vital for them to be available on popular trading platforms to gain traction and users. Bitcoin SV’s market cap is just $976 million, lagging far behind bitcoin ($92 billion) and ethereum ($17.6 billion). After Wright’s blowup—and the delistings—the price of Bitcoin SV has dropped almost 30%.

In truth, it doesn’t matter whether Craig Wright claims to be Satoshi Nakamoto. The delisting of Bitcoin SV—over a personal feud—is exactly why large institutions are scared of investing in crypto. Kicking Craig Wright to the curb is more like telling a bully he can’t eat lunch with you anymore than the administrative process of delisting a stock from Nasdaq. Binance and Kraken’s delistings weren’t driven by quantitative metrics like Bitcoin SV’s small market capitalization, free float, or inadequate development support. Rather, it was personal.

Removing Wright’s pet project from exchanges may be the morally responsible decision, but it’s another reminder of how the crypto community doesn’t behave like the larger world of finance. No matter how egregious the behavior of a company’s founder or CEO, no exchange would delist a publicly traded company to punish them. Until listing standards are formalized and enforced across the digital currency industry, Wall Street will likely remain on the sidelines.

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Regulatory Watch

Financial Services Agency worries about cold storage

Japan’s financial regulator is concerned that cryptocurrency exchanges lack protection against internal theft. Specifically, the Financial Services Agency is worried about “cold storage,” a method of storing cryptocurrency in wallets that aren’t connected to the internet. The regulator will reportedly require improved internal controls, as some exchanges have failed to rotate who is in control of these offline wallets.

Please send news, tips, and Australian imposters to privatekey@qz.com. Today’s Private Key was written by Matthew De Silva, and edited by Oliver Staley. We aim above the mark to hit the mark.

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