XRP drops after Ripple co-founder’s crypto wallets hacked: CNBC Crypto World

CNBC Crypto World features the latest news and daily trading updates from the digital currency markets and provides viewers with a look at what’s ahead with high-profile interviews, explainers, and unique stories from the ever-changing crypto industry. On today’s show, Chuck Mounts, chief DeFi officer at S&P Global Ratings, discusses the agency’s recent ranking of stablecoin stability and his outlook for digital assets.

Chapters:
00:00 – CNBC Crypto World, Jan 31, 2024
0:23 – XRP drops
0:43- The headlines
2:46- S&P Global’s Chuck Mounts

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XRP drops after Ripple co-founder’s crypto wallets hacked: CNBC Crypto World

Today FTX reportedly abandons plans to restart after bankruptcy xrp prices swing as a co-founder’s crypto wallets are hacked and Chuck mounts Chief defi officer at S&P Global ratings discusses the agency’s recent stable coin stability assessment welcome to cnbc’s crypto world I’m TAA mckel major cryptocurrencies are in the red this

Morning Bitcoin hovered right around $43,500 while ether fell about 1% as of noon Eastern xrp meanwhile taking a hit this morning after a hacking incident temporarily drove the price as low as 49 C by noon it had recovered to 51 C okay let’s talk more about that hack hitting

Xrp’s price blockchain SLU Zack xbt pointed out in a post on X that around $112 million in xrp had seemingly been stolen on Tuesday speculation that the Ripple platform had been hacked sent the price of xrp tumbling but in a post on x this morning Ripple co-founder Chris

Larsson clarified that it was his own personal accounts that had been accessed not a hack of Ripple itself Larson said the problem was quickly caught and exchanges were told to freeze the affected addresses he also said law enforcement was involved all right some other stories you should know about FTX

Is reportedly abandoning its efforts to restart After exiting bankruptcy reuter cited a company attorney as saying that FTX had been negotiating with bids and potential investors for months but none were willing to put up enough money to rebuild The Exchange now in that same court hearing FTX also reportedly said

It expects to repay customers in full more than a year after the co-mingling of funds by Sam bankman freed and other Executives forced the collapse of the once popular exchange and finally former British Finance Minister George Osborne is joining coinbase as a global adviser the exchange’s chief policy officer

Posted the announcement on X saying George is one of the most experienced and thoughtful leaders in government and business and that coinbase is grateful to have his advice and count as the company expands globally here in the US The Exchange faces an ongoing legal dispute with the SEC and CEO Brian

Armstrong hinted at relocating the company to the UK If regulatory uncertainty persists coinbase has also told CNBC that the company chose Ireland as its hub in the EU where maika regulations come into effect at the end of the year all right you might think of the S&P as being tied to traditional

Finance but they’re making a big push into the decentralized finance space as well crypto worlds t Kaplan spoke with Chuck Mount Chief defi officer at S&P Global ratings about the agency’s recent ranking of stable coin stability and what else it’s doing to leverage its analytical and risk assessment

Capabilities to support both trafi and its growing defi client base I want to start off by asking you why stable coins are considered a critical component in the crypto ecosystem how is S&P Global thinking about the stable coin Market in 2024 right so when we were ideating what

Is the right product that we should strive to bring to the market to leverage our historical expertise and credit risk analysis into the crypto Finance ecosystem uh we did an extensive Market sounding um with across a wide range of stakeholders so trafi crypto native buyid sells side Regulators

Policy makers academics and like you know when you speak in markets there’s rarely a unanimous view towards anything uh but there was actually unanimous view that the marketplace needed a better insight into the different the risks that exist both idiosyncratic risks and macro risks that exist between different

Stable coins and so that really spawned our um interest in the in the topic and thinking about how can we create a product that will help uh Market stakeholders understand those risks between different stable coins and the risk of them deeing against their targeted one toone against a fiat currency

Um and I think that the reason um stable coins have gained so much attention from that wide range of stakeholders for when we started this conversation us hadn’t even happened yet uh and those were the comments we received and then after us those comments just accelerated from

There and I think one of the key reasons uh that that exists is because the stable coins play an integral part of the crypto Finance ecosystem and you can see that in the market cap and growth of the stable coin ecosystem but also because they serve as a bridge between

Traditional finance and crypto Finance so from both those perspectives we thought this was a very logical place for us to leverage our historical expertise of credit risk analysis and go into what what we would consider an adjacency to that core competence for us expanding on that in December S&P Global

Ratings launched what’s called a stable coin stability assessment it ranks the stability of several stable coins so why did S&P Global think in assess like this was important and what were some of the factors considered I can imagine regulation is one of them absolutely so

We had to create a first of all a new set of criteria to evaluate and a method and then wrap those into a methodology uh to capture a systematic approach to the risks inherent in stable coins and unlike a credit rating uh the stable coin stability assessment is really

Targeting a specific thing which is the risk of a St coin dep pegging from its targeted onetoone relationship with the fiat currency so in order to do that uh we took all that input we had from having Market discussions and then we undertook a very specific and targeted

Market sounding with a range of stakeholders to get their input on what are the factors that they think are most relevant um and critical to the risks of stable coins dep pegging so in our methodology and our framework it all starts with an evaluation of the asset quality

That underpins the the St the relationship to fiat currency and then there are five additional factors that get U kind of in included in that evaluation so you start with the asset quality score then you add in the additional factors the additional factors uh at the best case will leave

The asset quality score where it is or they can bring the score down so there’s no way to raise the score from the additional factors but only to lower it and those additional factors include things like you mentioned for instance like governance uh legal and Regulatory Frameworks uh redeemability and

Liquidity as an example as well as third-party dependencies and technology and track record so there’s a a very robust framework that combines all the idiosyncratic risks what we believe to be the most important idiosyncratic risks of a stable coin as well as some of the macro factors that go into um

This a stable coin being able being able to make maintain its one to one peg so out of the eight stable coins analyzed usdc a stable coin Peg to the US dollar got a strong rating for example While others including tether didn’t Faire so well how did S&P Global reach these

Conclusions and what are some of the findings of that assessment that jumped out at you yeah so as I said they really start with the asset uh quality score um and you can see that when you go through the the scoring methodologies you know we rank the the the stable coins one to

Five one being the strongest and five being the weakest um and you can see that there were several or two coins in particular that had an asset quality score of one um but then had um some the additional factors brought the score down by one uh the other stable coins

That we provided a score on ranked anywhere from a two to a five and that is really looking at the features that go into um the asset the asset reserve the accessibility the attestation things of that nature so you know depending on the how the analytic team views the

Strength of the asset quality that’s where the the rating would start now you noted that the development of smart contracts increased substantially during the recent crypto downturn which you said was precipitated by the teral Luna stable coin collapse that collapse set off other implosions of course and let

To a lack of trust in the industry in turn we saw asset values plunge but now we’re seeing prices move higher with Bitcoin hitting $43,000 mark this morning and we’re seeing optimism in the space with developments like spot Bitcoin ETFs trading here in the US so what has shifted in this current

Backdrop and what’s your outlook for the defi space in this environment yeah so it’s it’s been a you know a crazy year uh I guess if you’ve been in crypto Finance from the beginning or crypto from the beginning you could probably say that almost any

Year um but I you know I’m very excited about the progress that the ecosystem is making and that players in in the marketplace are making um and what I see from the seat we sit in is that the technology advancements continue uh to to run full steam ahead and even though

Crypto valuations from the beginning of the bare Market through the end of last year were probably down maybe 70 75% what you saw was that smart contract development was up hundreds of percent so despite the decline and valuations in the marketplace the technology advancements the innovation in the space

Just kept Galloping ahead um and I think that portends very favorably for the ecosystem and for the evolution of this new set of rails that will complement and disrupt uh the traditional Financial rails and one of the things that I think is most exciting also is that you see

Many of our traditional clients um launching um digital asset teams building tokenization platforms participating in regulatory sandboxes around the world all of which are helping build capabilities and bringing a robustness and more institutional framework to the crypto financial markets that I think will unlock the potential to transform how financial

Markets uh function so I think we’re still when it comes to defi or the harnessing of a blockchain and and crypto Financial rails into the financial ecosystem we’re still in the early stages and I would say things are still kind of in an experimental stage but we’re on a clear pathway towards

Mass adoption and that mass adoption will be fostered by uh by market participants elevating their capabilities by policy Frameworks becoming U kind of established and more integrated and by the advancements in technology all of which will lead to what we ultimately believe would be the mass adoption of these Financial intermediation

Capabilities okay that’s all for crypto world today we’ll be back again tomorrow we’ll see you then