Winklevoss Capital Partner Sterling Witzke: Dollar Is Not Designed for the Internet, but Stablecoins Are
Winklevoss Capital partner Sterling Witzke spoke to Cointelegraph about the future of stablecoins, regulatory clarity in U.S. and a fair price for Bitcoin
Sterling Witzke has been working at Winklevoss Capital — a venture capital firm set up by the famous Winklevoss twins — for five years now. As a professional investor, she is very interested in financing early stage crypto and blockchain projects. She believes that stablecoins are perfectly designed for the needs of internet payments and will steadily gain popularity as the industry evolves.
We talked to Sterling Witzke about the future of fiat-pegged cryptocurrencies, the necessity of proper legal frameworks and the future of the maturing crypto industry.
Clarity is always good for an ecosystem
Ana Berman: How do you think, what will 2019 bring in terms of regulation? The question is related to the ads that Gemini recently launched, which said, in particular, “Crypto needs rules.” Don’t you think it undermines the whole idea of decentralization?
Sterling Witzke: The short answer is no. As you know from the slogans, Gemini is very pro-thoughtful regulation and believes that consumers in the crypto space deserve the same protection as consumers in other industries.
It's all about making fair outcomes for all. It doesn't undermine the original ethos of crypto to have regulations. The distinction comes with the companies that are built on top of the protocol. So, at the protocol level, it's absolutely correct that you don't need any more regulation and rules, because those are already built in.
You've got the math and the cryptography that dictates the rules on the protocol. The difference is that the applications and companies built on top of those protocols are run by humans, and we all know they are fallible. That's where the oversight comes into play.
AB: The United States Securities and Exchange Commision (SEC) has recently claimed that crypto will be its top examination priority in 2019. Do you believe the SEC will take some important steps this year?
SW: I hope so. I think that regulatory clarity, especially on things like security tokens versus utility tokens, is needed to get us towards mass adoption. I know there are several companies that were thinking about raising capital, but are now a bit hesitant because they just aren't quite sure how to operate in a gray area. Such firms want to ask for permission rather than forgiveness, which is our model also, and thus we appreciate that. But I think that clarity is always good for an ecosystem.
AB: Many entrepreneurs participate in crypto initiatives, like draft bills, round tables, etc. Is Winklevoss Capital interested in proposing some regulation or maybe discussing it with legislators?
SW: Tyler and Cameron are very involved and proactively working with regulators to help form the way that these rules are made, which I think is very important. We don't want government to come down with a heavy hand, as they might not understand the intricacies of the ecosystem.
I am not involved in the regulatory side, but Tyler and Cameron have been very active in the space for a long time. One of the most recent initiatives is the Virtual Commodities Association [VCA], which is a self-regulatory organization started by Gemini. I believe that its current executive director, Maria Filipakis, is actually from the the New York Department of Financial Services [DFS]. So, there is a lot of ongoing communication and collaboration with regulators to try to move this case forward.
Investors are dipping their toes in crypto, no one is taking the plunge
AB: As far as we know, Winklevoss Capital is mostly focused on the investments and the institutional side of the business. Do you believe there will be more Wall Street involvement in 2019? What do you expect in terms of institutional investments?
SW: I don't think that 2019 is necessarily the year. The end of 2017 was so crazy. People tend to think of the space as moving at lightning speed, but the underlying development doesn't move that fast. I think it takes a while for institutions to get comfortable. There needs to be a better custody, and any kind of healthy debt and credit markets to get those institutions really excited.
So, I don't think that I would make a prediction that 2019 is necessarily the year. I think that a lot of investors are thoughtfully dipping their toes in, but I don't really see anyone completely taking the plunge.
Crypto markets face healthy corrections, as any emerging industry
AB: CNBC’s Brian Kelly once compared crypto regulations to a ski track. Someone has to put a warning sign on a dangerous one, and the skier then decides whether to take risk or not. Do you think it is a relevant description of what’s going on?
SW: I think that is a nice sentiment. The majority of me believes in free markets and free will. Everyone should be able to invest in what they want to invest in. But the fact is that we have some responsibilities to protect people.
I grew up in South Dakota, for example, and crypto has not really made a splash in the Midwest, yet. In the end of 2017, I had lots of friends who bought Bitcoin at $18,000 or $19,000 and kind of lost their shirts. For such a new market, we need the same protections as we do with public equities. The precedent is already here, and there is really no difference.
AB: You just mentioned the bubble of December 2017. Do you think it was a necessary process — let’s say, a sign of development?
SW: One hundred percent. I think that lots of new industries need irrational exuberance to garner excitement and re