ShapeShift exchange has become the latest in a string of cryptocurrency and blockchain companies to announce major layoffs due to the ongoing cryptocurrency bear market.
In a Medium post entitled “Overcoming ShapeShift’s Crypto Winter and the Path Ahead,” Erik Voorhees detailed several different factors behind the change of course and stated that one-third of the workforce is being laid off, 37 employees in total.
The ShapeShift CEO cited many reasons, chief among them being the heavy exposure of the company assets to cryptocurrency.
As a company, our greatest and worst financial decision is the same: to embrace substantial exposure to crypto assets. Much of our balance sheet is comprised of them. We accept the volatility, we accept the risk.
However, the crypto-crash is not the only factor in the layoffs. Voorhees also explained that the company had diversified into too many products too soon, creating CoinCap, acquiring the KeepKey wallet, and launching a number of other initiatives which all consumed time, money, and focus. Voorhees added that Shapeshift’s core business wasn’t sufficiently nurtured, saying “I can lay this mistake at nobody’s feet but my own.”
Beyond that, the exchange made the controversial decision last year to implement KYC measures due to regulatory pressure, requiring users to submit and verify their identities. As covered by CCN, this was an understandable but unpopular move which drew widespread criticism from ShapeShift customers and commentators.
Voorhees stated in the blog post that the implementation of KYC took a financial and psychological toll, with many API partners leaving for “competitors who have not perceived regulatory risks in the same way.”
It is worth noting that while Voorhees has publicly lamented the imposition of KYC, he does not cite it as one of the mistakes made by the company in this recent post, and has consistently maintained that it was a regrettable but necessary action due to tightening regulatory pressure. ShapeShift’s CTO has discussed regulation with CCN in the past, stating that US regulation had “gotten worse.”
ShapeShift reportedly grew a staggering 3,000% in 2017, and Voorhees candidly stated today that the company physically outgrew the abilities and experiences of the leadership to manage the size of the team. With the team growing from the founders to 10, 20, to 125 people, the company scaled too fast while also tackling too many new projects.
With such meteoric growth came close regulatory scrutiny and legal issues.
So we started exploring every nuance of complex financial services regulation. As we stepped into this mire, immense legal bills and risk assessment forced resources to be diverted away from important parts of the company.
Voorhees said “it is the confluence of these issues combined with our own lack of product focus that resulted in today’s layoff.”
Voorhees concluded the post stating that the exchange would be focusing on pain points faced by crypto traders in trusting third-party exchanges with funds, saying the company aims to fix the “tragic” custodial risk inherent in trading cryptocurrencies. He stated that the company has been “weaving the new ShapeShift into existence,” perhaps hinting at an upcoming ShapeShift DEX or custodianship service. Finally, the CEO wished his departing employees “good fortune and good grace,” apologizing earlier in the piece for the loss of their jobs.
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