Why we should pray for crypto’s survival

Note to self: don’t sound smug about the sudden collapse of FTX – the Bahamas-based crypto exchange whose valuation has been zapped from $32 billion to zero – because however much it plays to I-told-you-so instincts about the mug’s game of crypto, the episode may herald a wave of wealth destruction that’s the last thing the financial world needs when there’s already so much bad stuff going on.

Still, smugness is a strong temptation here – and what could be more provoking of that sentiment than a photograph in the Daily Telegraph of Sir Tony Blair and Bill Clinton on an FTX-badged stage alongside the firm’s 30-year-old founder Sam Bankman-Fried in his shorts and scruffy trainers? This is a complex emerging scandal in which large sums of FTX client funds may have been mis-appropriated, allegedly to fund high-risk bets by Alameda Research, Bankman-Fried’s trading business that ran alongside FTX. But it’s also a plain parable of money talking: how a crypto brat who banged on about ‘effective altruism’ and gave millions to Democrat campaign funds could buy himself the status of a wunderkind guru.

The crypto house of cards is wobbling as prices plunge, punters cash out and observers scour the horizon to see which of FTX’s competitor exchanges might also stumble: the FT reports ‘contagion fears’ focused on Singapore-based Crypto.com. The sector is unregulated and its virtual tokens have no intrinsic value; advocates proclaim it as the libertarian riposte to the fraudulence of ‘fiat’ currencies, but in truth crypto was never anything more than a giant online casino. Its sole contribution to economic progress is the ‘blockchain’ in which crypto transactions are recorded, which has the potential to make other payment systems more efficient; on the other hand, ‘crypto mining’ (the generation of new tokens) uses vast quantities of electricity and microchips that could be put to far better purpose.

If the entire crypto industry were to implode, prudence and common sense would be the victors. The trouble is that such a crash would also bring down unknown numbers of hedge funds, damage the banks that service the industry and destroy billions of dollars of savings – not only of gamblers for whom we might not feel sorry, but also of conventional investors whose fund managers had followed fashion by putting a slice of their portfolios into bitcoin. And the last thing we need now is that kind of domino fall. So sceptics should pray for crypto’s survival – but as an obscure collectors’ hobby-cum-dangerous sport, not as a crusade that claims to be revolutionising the financial world.

Art’s as good as gold

Speaking of collectors’ hobbies and the mystery of ‘intrinsic value’, what lesson should we draw from last week’s $1.6 billion sale by Christie’s in New York of artworks from the collection of Paul Allen, the late Microsoft co-founder? Record prices in the sale included $106 million for Gauguin’s ‘Maternité II’ of 1899, with many lesser pictures breaking through the $20 million barrier. Not only are the super-rich still confident enough to bid up for these trophies but – we might surmise – they evidently still think of them as safer stores of value than today’s standard menu of investment choices: tech stocks tumbling, real estate values hit by rising interest rates, anything with income attached hit by rising taxes, crypto see above.

Against all those, an object of timeless beauty over the mantelpiece, with full provenance, is surely as good as gold. And the only person I suppose we should feel sorry for is poor penniless Paul Gauguin.

Innovators’ optimism

The one underground line operating in strike-hit central London last Thursday evening was the miniature mail train that’s a fun feature of the Postal Museum in Phoenix Place – which also happened to be the venue for the finale of The Spectator’s Economic Innovator of the Year Awards, sponsored by Investec. The challenge of getting to the party offered a mini-metaphor for the wider obstacles faced by today’s entrepreneurs, including likely tax measures in this week’s Budget. We were delighted so many of this year’s 31 regional finalists from every corner of the UK made the journey and contributed to the bonhomie.

In brief, I can report our overall winner (and London and South-East regional winner) is SafeToNet, a fast-growing cyber-security venture with global potential that uses artificial intelligence to protect children from online abuse and exploitation. Co-funder Richard Pursey’s passionate pitch to our judging lunch was the first ever to win spontaneous applause from other entrants present. And this year’s special award for excellence in sustainability went to Recycleye – which uses robotics and computer vision to bring greater efficiency to the picking process in the waste management industry.

For the South-West region, we chose Neighbourly, an ‘engagement platform’ that connects retail chains and other big businesses to local good causes. For the Midlands, mOm Incubators, whose portable, low-cost device is helping to save the lives of premature babies in the Ukraine and elsewhere. From Scotland and Northern Ireland, Synaptec, which provides digital sensor networks for the power industry to reduce outages and operational costs. And from the West and North-West, Interact, which helps data centres and large IT systems consume less energy and reduce environmental impact.

The last of our regional winners, for the North-East, was Mud Daddy, maker of a portable dog-washing device so original that Amazon had no product category in which to list it. Founder-inventor Reza Gachcar and his wife sold their house in Newcastle to fund the launch of what’s now a multi-million-pound business – and their new home is so stylish that ‘my neighbours think I must be a footballer or a drug dealer’. If we had a special prize for cheerfulness and optimism – essential characteristics of entrepreneurship in challenging times – Reza would have won that too.