Over a year after the infamous Terra, FTX and Celsius collapses in 2022 and the many more incidents that have plagued the industry since then, execs bring up the role of crypto rating agencies in mitigating risks within the crypto sphere.
In 2022, Ben Goertzel, the CEO of decentralized artificial intelligence (AI) firm SingularityNET, argued that rating agencies could rebuild trust in crypto much more than regulators. Fast forward to 2024, and the executive told Cointelegraph he still cannot find any regulatory efforts to increase his faith in protecting crypto uses. He explained:
“Nothing that the world’s regulatory agencies have done since 2022 has increased my faith that they are going to be able in practice to do more good than harm for customers or service providers in the crypto space.”
On the other hand, the executive added that “transparent, crowdsourced and intelligently aggregated rating mechanisms could add a lot to the crypto landscape.” Goertzel also mentioned that advances in AI technology would now make it easier to produce customized summaries on the reputations of various entities in crypto using raw data and reports from various sources.
According to Goertzel, United States regulator’s handling of the FTX case showed there was no need for special laws for crypto fraud as the laws against it can also be used to arrest “crypto fraudsters,” much like anyone else who facilitates fraud.
While Goertzel does not believe that rating agencies could have prevented the FTX collapse, the executive believes it could at least have “alerted customers to the numerous red flags observable in advance.”
Related: Celsius transfers $125M of ETH to exchanges as FTX and Alameda dump
Anastasia Ulianova, the co-founder of the crypto ratings platform Aria, agrees that there are limitations to rating agencies’ roles in collapses like FTX. Ulianova said that while they can “raise red flags” when the risk of one crypto or another is higher than its performance would suggest, they cannot predict collapses. She explained:
“A very important point to stress is that a rating can only tell you how much risk you are taking. It is not by any means a certain prediction of an upcoming collapse.”
Despite this, the executive believes that beyond assessing the risks and legitimacy of projects, rating agencies can allow investors to gauge the risk-to-reward ratio of tokens to help them determine if the expected returns justify risks. The executive added that their company’s goal as a rating agency is to “legitimize the place of crypto assets in a traditional investment portfolio.”
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