Overstock CEO: Modern Financial System is a Ponzi Scheme, Collapse Will Bring Global Crypto Adoption

Patrick Byrne, the CEO of Overstock, stated in a recent interview that the entire modern financial system is a “big Keynesian magic money tree ponzi scheme”.

The statements were made during an interview with crypto YouTuber Naomi Brockwell on Monday, October 7.

The CEO of the tech-driven online retailer, which was one of the first major retailers to accept bitcoin, also believes that the modern financial system will eventually collapse, ushering in the global adoption of cryptocurrencies:

“People turn to it where they collapse, like Venezuela or Cyprus or Syria, something like that. When people start getting into it is when their own financial systems collapse.”

When asked about the role of governments in regulating cryptocurrencies, Patrick admitted being a national security libertarian. He believes that know-your-customer (KYC) and anti-money laundering (AML) requirements are important tools to keep criminal activity from thriving on the crypto sphere:

“I guess I must confess, as revolutionary as I am – I’m what you could call a national security libertarian. So I worry about threats to our country. And that means that KYC and AML are not just things to be scoffed at.“

Patrick believes that it is possible to take blockchain to the point where it becomes completely anonymous. On the one hand he loves the idea of becoming truly free and anonymous, but on the other he acknowledges that there will be some bad actors that will take advantage of the situation to hurt others.

Patrick is of the opinion that there is a right balance between freedom and security but “the more the world gets digitized, the more there will be government surveillance.” He trusts that distributed ledger technology can remake society and hopes that authoritarian states are unable to exert control and own the technology. Specifically referring to China, he also expressed his concerns on the country’s plans to rank all its citizens based on a "social score" by 2020.

Patrick thinks that social barriers and stigma and the idea that Bitcoin is mainly used for illegal drug trades and money laundering, are what’s holding back crypto adoption. When asked if Bitcoin will become a worldwide currency or if it will always have specific use cases he replied:

“Now, whether Bitcoin is the one, whether Bitcoin has solved its speed problems or it’s another cryptocurrency, only time will tell.”

How Bakkt Can Bring the Crypto Space an Institutional Investor Influx

Cryptocurrency enthusiasts have for years been waiting for institutional investors to enter the space. While the introduction of bitcoin futures contracts on regulated exchanges in late 2017 didn’t gain a lot of traction, but Bakkt may.

Bakkt is a long-awaited bitcoin futures exchange and on-boarding platform from the Intercontinental Exchange (ICE) - the parent company of the New York Stock Exchange – and it’s set to launch this year. Bakkt itself has remained tight-lipped over the precise launch date after delaying its launch last year, with ICE CEO Jeff Sprecher in February simply saying “later this year.”

It’s possible that this quarter may see the launch or at least more news about when the exchange is finally coming. At the end of March, Bakkt CEO Kelly Loeffler explained:

While we’re not yet able to provide a launch date, we’re making solid progress in bringing the first physical delivery price discovery contracts for bitcoin to the U.S.

Bakkt’s launch could be a major milestone for the cryptoasset industry. A venture backed by Microsoft and Starbucks, its institutional pedigree alone will switch many cautious investors on. Specifically, the firm is set to help consumers pay for goods and services with cryptocurrencies, with Starbucks being the flagship retailer in its arsenal.

Bakkt’s Bitcoin futures contracts will be the first physically-settled derivatives on a regulated trading platform. This means investors will receive the contract’s underlying asset, bitcoin, when it expires.

Currently the Chicago Mercantile Exchange (CME) offers cash-settled bitcoin futures contracts, meaning investors get the equivalent of BTC’s value in fiat when the contracts expire. This is seen by some as a major development in the cryptocurrency space, as it shows traditional finance is willing to interact with the nascent cryptoasset industry.

It’s worth noting that earlier this year the ICE’s CEO called Bakkt a “bit of a moonshot bet,”  as it was organized in a way “very different than the way ICE typically does business.” The firm has its own offices and management team, and could undergo more rounds of financing in the future.

Bakkt And a Potential Bitcoin ETF

What’s significant about Bakkt’s launch beyond this, is that it may bolster the chances of a Bitcoin Exchange-Traded fund (ETF) being approved. Such a product would make it easier for institutional investors to gain exposure to cryptocurrencies.

In August, the US Securities and Exchange Commission (SEC) rejected nine other ETF applications, in particular highlighting how those applying hadn’t provided evidence that “bitcoin futures markets are of significant size’” for an ETF to be launched.

Once Bakkt is launched its trading volumes may very well help quell the SEC’s concerns over the bitcoin futures markets’ small size as institutions and other investors may feel comfortable entering it. Larger futures contracts trading volume, increased liquidity and a well-established company involved may prove enough to convince the SEC that the time is right for a Bitcoin ETF.

Bakkt therefore represents a very significant milestone for a maturing cryptoasset industry and may well herald the “institutional influx” that many have been anticipating since 2017. Despite the markets remaining relatively flat throughout 2019 these looming decisions in the U.S. have the power to move the entire industry forward, for better or worse.