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More than a year after the Terra, FTX, and Celsius bankruptcies and many other events that have troubled the industry since then, executives have started to bring up the role of rating agencies in reducing risks in the crypto space. Ben Goertzel, CEO of decentralized artificial intelligence firm SingularityNET, argued that rating agencies would increase trust in the crypto sector.
Notable Statements from a Prominent Executive
In a statement regarding the issue, Ben Goertzel pointed out that he has not found any legal regulatory efforts that will increase the reliability of the crypto sector by 2024, and made the following remarks:
“Nothing that regulatory bodies have done since 2022 has increased my belief that they could be more beneficial than harmful to customers or service providers in the crypto space.”
The executive also added that transparent, crowd-sourced, and intelligently assembled rating mechanisms could contribute a lot to the crypto environment. Goertzel also explained that advancements in artificial intelligence technology now make it easier to produce reports on the reliability of various assets in the crypto industry using raw data and reports from various sources.
According to Goertzel, the handling of the FTX case in the United States showed that there is no need for special laws for crypto fraud, as laws against fraud can also be used to arrest crypto fraudsters just like anyone else who facilitates fraud. Although Goertzel does not believe that rating agencies could have prevented FTX’s bankruptcy, he believes they could have at least warned customers about numerous red flags that were observable in advance.
Rating Agencies and the Crypto Sector
Anastasia Ulianova, co-founder of the crypto rating platform Aria, admits that there are limitations to the roles of rating agencies in bankruptcy processes like FTX. Ulianova said they could raise red flags when a crypto company’s risk is higher than its performance indicates, but they cannot predict a bankruptcy process:
“It is very important to emphasize that a rating can only tell you how much risk you are taking. It is by no means a definite prediction of an impending bankruptcy.”
Nevertheless, the executive believes that beyond assessing the risks and legitimacy of projects, rating agencies could allow investors to determine whether the expected returns justify the risks by measuring the risk-reward ratio of crypto assets. The executive also added that the goal of their company as a rating agency is to legitimize the place of crypto assets in a traditional investment portfolio.
