This week’s FTX collapse is “a tragedy and total failure of governance,” Blockchain.com CEO and co-founder Peter Smith told CNBC’s “Closing Bell” on Thursday, but it’s not going to sink the crypto economy by any stretch.

According to Smith, the rapid downfall of Sam Bankman-Fried’s company will accelerate a trend back towards regulated crypto institutions as well as a shift back towards individuals holding crypto assets on their own private keys. 

“Crypto is one of the very few assets in the world that you can custody yourself, and I think we’re going to see folks increasingly move back to that model as well as move to a model of trusting regulated companies in the space,” Smith said. 

Smith said the overall crypto and blockchain economies, and companies like his that rely on private funding, should not face major barriers in receiving money from investors. He said for all the hype — FTX was recently valued at as much as $32 billion though investors had marked it down to zero this week — FTX was not a market leader or key player in the crypto ecosystem. It was, Smith says, highly popular within Silicon Valley-based groups, which was confusing to him since investors were excited about the company which had very low levels of governance.

The FTX situation will lead more investors to focus on corporate structure in crypto moving forward.

“This was very much a Silicon Valley momentum play, and we’ve seen that very clearly not work out,” Smith said. 

Some analysts have said crypto exchange Coinbase could be among the companies to benefit from a greater focus on regulated entities. Brian Armstrong, CEO of Coinbase, which announced additional layoffs on Thursday, told CNBC on Thursday afternoon the relatively small number of job cuts were related to the overall market conditions and need to manage costs and cash as a public company.

SEC Commissioner Gary Gensler told CNBC on Thursday that the American public needs to “be careful, beware. There’s still a lot of noncompliance and when you give somebody your token, and they go down, you’re going to just stand in line at a bankruptcy court and they may be taking your token and doing all sorts of things without proper disclosure. Now, if it’s one to one back, and there’s really good disclosure, and your protect against fraud, manipulation, that’s all we’re saying. That’s what the securities laws are.”

In response to a question about Coinbase and Binance (FTX’s would-be acquirer), Gensler added, “I am not going to speak to any one platform, but I would say that you have these rules and the laws are clear, but do not assume that these firms are complying with the rules and the laws that the New York Stock Exchange or the biggest brokerage apps are complying with.”

Armstrong pushed back in his interview, saying that as a public company, concerns about crypto custody are a “non-issue.”

“We hold customer funds one to one backed,” he said. As a public company, he added, it has financial statements audited by big four accounting firms. “What happened to FTX is not possible to happen at Coinbase, and we are a regulated institution in the U.S.,” Armstrong said.

Blockchain.com, which came in at No. 7 in CNBC’s 2022 Disruptor 50 list, is the company behind approximately a third of all bitcoin network transactions since 2012.

“The ultimate reality and the coolest part of crypto is that you can store your funds on your own private key where you have no counterparty exposure,” Smith said. “And it’s been our mission to enable that for the last decade.”

Sign up for our weekly, original newsletter that goes beyond the annual Disruptor 50 list, offering a closer look at list-making companies and their innovative founders.