By Naveen Athrappully
Charlie Munger, vice chairman of Berkshire Hathaway, has issued scathing comments on the crypto industry after one of the globally leading exchanges FTX collapsed last week.
“It’s partly fraud and partly delusion,” Munger said on CNBC Tuesday. “That’s a bad combination. I don’t like either fraud or delusion. And the delusion may be more extreme than the fraud.”
FTX filed for Chapter 11 bankruptcy last week after concerns about the company’s balance sheet triggered a mass withdrawal of funds by depositors, pushing the firm into a liquidity crisis.
Though the company’s filing had initially estimated that there would be 100,000 creditors affected by the collapse, the firm upped the estimate to more than one million in a later filing.
Crypto hedge funds like Ikigai, which maintained a major portion of its assets on FTX, are now in an uncertain position.
Munger has long been a critic of cryptocurrencies and had earlier called for banning them. Back in April during a shareholder meeting, the renowned investor said that he tries to avoid things that are “stupid and evil,” pointing to Bitcoin, the largest cryptocurrency in the world, as fitting all criteria.
Warren Buffet, Legislation
Chairman Warren Buffet, who controls Berkshire Hathaway, is also a strong critic of cryptocurrencies. During the April shareholder meeting, Buffet pointed out that cryptos are not a productive asset as it does not produce anything.
He cited investing in apartments and farms as far superior to betting money on cryptos. “The apartments are going to produce rent and the farms are going to produce food,” Buffet said.
As of Nov. 16, the global cryptocurrency market cap was just over $883 billion, which is down by 68.23 percent from a year ago. In November last year, the market cap had hit a peak of nearly $2.9 trillion.
In a tweet on Nov. 12, Sen. Pat Toomey (R-Pa.) criticized the failure of Congress to pass legislation establishing “regulatory guardrails” in crypto trading for creating legal uncertainty in the industry.
He also blamed the “complete hostility and lack of transparency” by the U.S. Securities and Exchange Commission as another factor.
“These failures have driven crypto development to foreign jurisdictions that have little or insufficient regulation. We’re now seeing the consequences in the failure of @FTX_Official,” he said.
If a “sensible, legislatively authorized” framework for digital assets existed in the country, the impact of FTX’s bankruptcy filing on Americans might have been mitigated, Toomey insisted.