Cryptocurrency Regulation Will Bring Big Money: Kevin O'Leary
Cryptocurrency Regulation Will Bring Big Money: Kevin O’Leary
Shark Tank investor Kevin O’ Leary is a former crypto skeptic turned true believer. On the Bankless Podcast, O’leary said clear legislation will drive up crypto’s value. He shared his strategies for intelligently investing in cryptocurrencies. Back in 2019, Kevin O’Leary went on CNBC and called bitcoin “garbage,” a “useless currency,” and said that when it comes to bitcoin investment, “there is nothing here except raw speculation. No different than when I put my money on black or red at a casino.”
“When people put real money into this they make no interest, they can’t pay their taxes with it, the regulators don’t like it which is always problem for compliance, and where’s the long term value,” O’Leary asked bitcoin bull Anthony Pompliano on an episode of CNBC’s SquawkBox later in 2019.
But in the years since, the “Shark Tank” judge and O’Shares Investments chairman has completely changed his mind on crypto.
In fact, O’Leary has become a vocal crypto bull, and recently visited members of Congress in Washington DC currently debating the merits of Senator Lummins’ crypto bill to lobby on behalf of the industry to Congress.
O’Leary recently went on the Bankless Podcast , where he shared his optimism about crypto despite the market’s recent downturn, and why he thinks that with clear regulatory frameworks in place crypto could become the “12th sector of the economy.”
Why regulation matters Crypto has traditionally been seen as a fringe aspect of the financial world, largely due to the lack of regulatory oversight in the industry. Just last year SEC Chief Gary Gensler called crypto the ” wild west ” of investing, and said that crypto needs more investor protection.
For O’Leary, it was the fact that crypto could see itself getting regulated by authorities that made him change his mind.
“What turned me around, what changed me completely was when the Canadians, the OSC (Ontario Securities Commission), granted the very first crypto exchange license attached to a dealer broker, a compliant platform. It wasn’t rogue anymore,” O’Leary explained to the Bankless hosts.
“They were moving forward with policy — that was regulated — and I immediately started investing in that because I saw it coming. I saw the writing on the wall,” O’Leary continued.
O’Leary said regulation in Canada could spur other countries to adopt their own crypto rules. And while regulation is important for protecting crypto investors, what O’Leary’s really excited about is how regulatory oversight will create clear rules that allow sovereign wealth funds and pension plans — where he says the majority of the world’s capital is held — to begin investing in cryptocurrency.
“I always ask these institutions and these sovereign funds, what allocation would you put into bitcoin? Just bitcoin — what would you allocate if you could? And they said, well, we can’t because our compliance department won’t allow it because the SEC hasn’t ruled on it yet,” O’Leary said.
O’Leary said that once regulations are adopted, the people who he knows who manage funds for sovereign wealth funds and pension plans would “allocate 50 to 100 basis points” to crypto. While that may not be a huge number, considering that the funds O’Leary’s describing have billions, if not trillions in funds, that’s very big money for the crypto industry.
“And that’s a huge amount of demand that would come into the market,” O’Leary said. “And as bitcoin prices went past that 1% allocation, let’s say, they’d sell it back down to 1%, but just importantly, if it dropped below 1%, they’d buy it back up. So there’d be an internal bid forever. The volatility would drop dramatically. There’d be price appreciation in bitcoin. It would be good for everybody involved in crypto, but we can’t do it without policy.”
“I’m talking about bringing the real money into crypto, the real sovereign wealth,” O’Leary continued. “And so for everybody that used to criticize me about saying, let’s get this thing regulated, now they understand why they wanna get it regulated too. It’s the trillion dollars that’ll come into this market overnight when it’s regulated.”
Crypto investing strategy O’Leary’s investment strategy boils down to two main concepts: diversifying your crypto investments, and focusing on companies that are building crypto infrastructure.
“I own 32 positions, 32 chain projects, 32 different coins of tokens,” O’Leary said. “I have no idea which ones will win over the next five years, but I don’t need them all to win. I just need a few to win, that’s what diversification’s all about.”
Some of the specific cryptocurrencies O’Leary has invested in include bitcoin and ethereum — where he says he’s focused most of his investments — as well as the altcoins solana and polygon .
O’Leary then explained why he believes infrastructure bets are important for his crypto investing thesis.
“I’ve made some investments in the infrastructure, you know, that old adage about the gold rush, you were better off owning and selling picks and shovels and jeans than you were trying to find gold.”
O’Leary is an investor and paid spokesperson for FTX , the crypto exchange founded by wunderkind Sam Bankman-Fried . He described FTX as the “first compliant institutional platform” that his auditors have allowed him to use.
O’Leary is also an investor in Circle , the company behind the stablecoin USDC. And he’s involved with WonderFi , a Canadian crypto-trading platform.
“I don’t invest in projects that I don’t use. I don’t care whether it’s a product or it’s a crypto product or whatever. You don’t see me in a lot of these very speculative tokens because I don’t use them,” O’Leary said.
2023 and beyond While he doesn’t see much clarity prior to the American midterm election, O’Leary said that after the House is settled, Congress will turn its attention to setting cryptocurrency policy.
Specifically, O’Leary thinks stablecoins should be the first sector of the crypto world to be regulated, and he has some ideas about what those regulations should look like.
“It’s gonna look like this: 30 day audit on the assets underneath it. You can bring any kind of stablecoin you want, but there’s gonna be a 30 day audit. No assets supporting the token or coin with a duration more than 12 months. So if you’re gonna use T-bills, they gotta be short duration, probably average of six months duration, and that’s very much like a money market ,” O’Leary said, specifically addressing the criticism that stablecoins — like Tether — lack solvent assets backing their stablecoin.
O’Leary ended the discussion on a positive note about crypto, despite the bear market that has crushed digital investments over the last few months.
“I think what happens is you get a binary increase in the value of crypto, the minute people even sense policy, and that’s gonna happen sometime in January, February, and March. So I wanna be positioned before then,” O’Leary said.
“It’s like being involved in the internet in its most early days,” O’Leary continued. “Same thing is going on here. Long term, it’s a great investment, but boy volatility. Yeah. It’s tough. 50% up, 50% down, 60% swings. Well, that was Amazon 12, 15 years ago. Now it’s bitcoin today.”
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