Crypto lobbying risks regulatory capture, South African cenbank boss tells Davos event

By Elizabeth Howcroft and Iain Withers

DAVOS/PARIS/LONDON (Reuters) - Surrounded by crypto executives buoyed by Donald Trump's presidency, South Africa's central bank chief on Tuesday criticized industry lobbying of U.S. policymakers, telling a Davos panel event that bitcoin made no more sense as a reserve asset than beef or apples.

Other panellists welcomed Trump's presidency as promising big opportunities for the sector, with Coinbase CEO Brian Armstrong saying Trump's new term will draw a lot of investment into crypto.

Bitcoin hit all-time highs above $100,000 following Trump's election, he said.

"The Trump effect cannot be denied here. To have the leader of the largest GDP country in the world come out undeniably and say that he wants to be the first crypto president... This is unprecedented," Armstrong said during a panel at the World Economic Forum annual meeting in Davos.

Armstrong also welcomed Trump's plan to create a U.S. government bitcoin stockpile, but the idea was criticised by South Africa's central bank governor, Lesetja Kganyago, who was also on the panel, on the grounds it suggested undue influence of lobbyists.

"I would have a significant problem with a lobby that says governments should hold this asset or hold that asset," Kganyago said.

"There is a history to gold. There was once a gold standard... If we now say ok, bitcoins. What about platinum? What about coal? Why don't we hold strategic beef reserves, or mutton reserves, or apple reserves? Why Bitcoin?"

Kganyago also criticised what he saw as the crypto industry's attempts to influence financial regulation, saying it risked "regulatory capture".

The cryptocurrency industry, including heavyweights like Coinbase and Ripple, spent more than $119 million backing pro-crypto U.S. congressional candidates, hoping to boost those who would pass crypto-friendly bills.

"If regulation is going to be established through the power of money, then we have a problem," Kganyago said.

Responding to Kganyago's comments, Armstrong said the impact of pro-crypto groups in the U.S. showed "democracy working".

Jennifer Johnson, CEO of Franklin Templeton, said some institutional investors had "blinders on" to the rapid growth of cryptocurrencies. "It's literally like two parallel universes," Johnson said.

Regulatory clarity is needed in the market to give big money managers confidence in the sector, she added.

BITCOIN RESERVES

Crypto investors are hoping Trump will introduce a national reserve of bitcoin after announcing plans to do so in July 2024.

While bitcoin's price cooled on Monday after Trump made no mention of crypto assets in his inauguration speech, Coinbase's Armstrong said plans for a bitcoin reserve were "alive and well".

Crypto executives held a ball in Washington last week to celebrate Trump's inauguration.

The upbeat mood marked a rapid turnaround from 2022, when a series of bankruptcies at top crypto firms exposed fraud and misconduct across the industry and left millions of investors with heavy losses.

(Reporting by Elizabeth Howcroft in Paris and Iain Withers in London; Editing by Jan Harvey)