Venture capitalists are giving up on cryptocurrencies, says Kevin O'Leary

According to Shark Tank star Kevin O'Leary, venture capitalists are fleeing from cryptocurrencyas regulators tighten the noose around the industry in a crackdown following the FTX collapse.

The investor claims that VC funding is now heading towards artificial intelligence.

Why regulators are going after cryptocurrencies

During conversation Posted on Twitter, O'Leary described his experiences attending various Capitol Hill hearings related to the FTX collapse and interacting with the politicians involved.

“These senators – they’re tired. They’re really tired of meeting every six months when another crypto company blows up and goes to zero.”

The past 12 months have seen no shortage of explosions in the crypto industry. After a euphoric 2021, hawkish monetary policy culminated in a massive drop in crypto asset prices the following year, resulting in mass layoffs and a flurry of bankruptcies at major companies.

These bankruptcies, likely sparked by Terra’s collapse in May, reached a peak when Sam Bankman Fried’s FTX empire collapsed in November, taking with it BlockFi, Genesis, and many others. Part of the FTX collapse has shed light on the fallibility of crypto tokens issued by FTX and similar firms. “They are completely unregulated, and they are still issuing tokens that are worthless,” O’Leary continued.

Venture funding for new #crypto projects are virtually dead and aftermarket trading for existing projects is at massive discounts. Why? The #regulator is now regulating by enforcement, penalties & massive fines. The venture community has moved on to the next “big” thing, #AI pic.twitter.com/ChpjYIY9Dl

— Kevin O'Leary aka Mr. Wonderful (@kevinolearytv) February 20, 2023

Given the circumstances, O'Leary was not surprised by the Securities and Exchange Commission's (SEC) hostility toward cryptocurrencies in recent weeks. The agency earlier this month fined Kraken $40 million for failing to register its staking service, while also issuing a Wells Notice against Paxos for its BUSD stablecoin issuance a few days later.

Kevin O'Leary: "You need to stay away from Gensler"

While Paxos and others – such as Coinbase – are fighting back against the SEC's strict crackdown, O'Leary sees the crackdown as good for his business. The investor owns a Canadian crypto exchange called WonderFi and believes that these events will be beneficial for it, along with other regulated firms. 

“You have to get in line with regulations…you have to stay out of Gensler at the SEC. FTX nudged the bear, the bear is awake and angry.”

O'Leary has long advocated for regulation, insisting that firms with long-standing grudges against the SEC, like Grayscale, are wasting their time fighting the agency.

Some crypto industry leaders, like Kraken CEO Jesse Powell, see things differently, saying regulators have allowed bad companies to expand and explode to justify subsequent crackdowns on good ones.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.