VC investors are abandoning crypto, says Kevin O'Leary

VC investors are abandoning crypto, says Kevin O'Leary

Venture capital money is fleeing crypto as regulators tighten their noose around the industry in a post-FTX crackdown, according to Shark Tank star Kevin O'Leary.

The investor claimed on Monday that VC funding is now focused on artificial intelligence.

Why regulators are crazy

During one interviewPosted 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,” O’Leary said. “They’re really tired of gathering every six months when the next crypto company blows up and goes to zero.”

There has been no shortage of explosions in the crypto industry over the past 12 months. After a euphoric 2021, restrictive monetary policy culminated in massive price losses in crypto assets the following year, leading to mass layoffs and an avalanche of bankruptcies among large companies.

These bankruptcies, arguably sparked by Terra's collapse in May, reached a peak when Sam Bankman Fried's FTX empire collapsed in November and BlockFi took over.genesisand others below with him.

Part of FTX's collapse shone a light on the fallibility of the investments it and similar firms made, such as FTXFTT. “They are completely unregulated and continue to issue tokens that are worthless,” O’Leary continued.

Given the circumstances, O’Leary isn’t surprised by the Securities and Exchange Commission’s (SEC) hostility toward crypto in recent weeks. The agencypunishedKraken $40 million earlier this month for failing to register its staking service, while days later it issued a Wells notice against Paxos over its BUSD stablecoin issuance.

Venture funding for new ones #Crypto Projects is virtually dead and aftermarket trading for existing projects comes with massive discounts. Reason? The #Controller is now regulated through enforcement, penalties and 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

Is regulation good?

WhilePaxosand others – such asCoin base— push back against the SEC's strict enforcement, O'Leary sees the crackdown as good for his wallet. The investor owns a Canadian crypto exchange calledWonderFiwhich he believes will benefit these events alongside other regulated businesses.

"They need to get into regulation... They need to get out of Gensler's way at the SEC," he said. “FTX nudged the bear, the bear is awake and he’s pissed.”

O’Leary has a long timeadvocatedProponents of regulation, insisting that firms with longstanding grudges against the SEC, like Grayscale, are wasting time fighting the agency.

Some crypto industry leaders like Kraken CEO Jesse Powell see things differently. Through hisAccountRegulators have allowed “bad guys” to expand and explode in the industry to justify subsequent crackdowns on good players.

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