Nouriel Roubini is not a friend of crypto exchanges. And he is completely unimpressed with the “proof of reserve” idea that Binance and other crypto players are touting in the wake of the terrifying collapse of FTX.
On Friday morning, Binance release announcement proof of its reserve system, starting with Bitcoin. It wrote on its website, “Following our recent announcement outlining our commitment to transparency, Binance will be releasing a Proof of Reserve (PoR) System, which is the next step in our efforts.” Our aim is to provide transparency about users’ funds. The launch of this feature will initially start with BTC, with other tokens and networks being added over the next few weeks.”
On the same day, Roubini tweeted, “Crypto is a corrupt gamble in which bookies systematically run losers. Over 100 million rekt scammers globally by a crypto gangster group.”
Earlier this week, Mr tweetedProof of Reserve (PoR) is a gimmick used by cryptocurrency exchange/lending platforms to pretend that their customers’ funds are safe. Since these assets are being deposited on the exchange, they are on the balance sheet and the client’s assets are not safe from bankruptcy. These are banks that do NOT exchange!”
He has also retweeted posts from others, including one on saturday from a Bitfinex reading, “Exchanges are trying to do so-called proof of reserve to show that they have customer funds. Remember, proof of reserve is meaningless. Exchanges borrow from each other to show cryptocurrencies. That’s why you see ‘accidental’ transfers of hundreds of millions of dollars.”
Crypto Industry ‘Absolutely Corrupt’
Roubini also called the crypto industry “totally corrupt” while say at Abu Dhabi Financial Week on Nov. 16 He called on the United Arab Emirates to expel Binance exchange founder Changpeng “CZ” Zhao — a resident of the United Arab Emirates. most licensed to operate in the country — liken him to disgraced FTX founder Sam Bankman-Fried.
“He is banned in the UK, he is being investigated by the US Department of Justice for money laundering…and he is here on this stage and has domicile in this country,” Roubini said. “He’s a ticking time bomb, he should be kicked out of the country.”
CZ proposed earlier this month that proof of reserve systems could reform the crypto industry and restore investor confidence, providing a new level of transparency that could prevent the kind of sketchy accounting that has contributed to the sudden boom of FTX.
“That’s definitely going to be the focus in the short term, that’s right,” he said. “We learned from our mistakes.”
Even before the crash of FTX, Binance was the largest cryptocurrency exchange in the world. Its position is even stronger now, but the collapse of FTX has cast a shadow over the entire crypto space.
Roubini is famous on Wall Street as a somewhat pessimistic person. He correctly predicted the financial crisis that followed the collapse of the US housing market in 2007, and he recently wrote The Age of Great Threatswhich outlines 10 major economic problems facing the world.
In September, he warned the US would be hit hard by a recession in 2023 and would also wreak havoc on financial markets. “This will not be a short and shallow recession,” he predicts. “It’s going to be serious, long-lasting, and ugly.”
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