Tech

Calls for regulation get louder as FTX contagion continues to spread

11/28/2022
Bitcoin Ethereum News

Crypto executives and politicians are becoming louder in their calls for crypto regulation as the aftermath of the FTX collapse continues to reverberate through the industry. 

In just the last 24 hours, the European Central Bank (ECB) president Christine Lagarde called regulation and supervision of crypto an “absolute necessity” for the European Union, while United States House Financial Services Committee Chair Maxine Waters announced that lawmakers will explore the collapse of FTX in a Dec. 13 inquiry.

On Nov. 28, United States Senator and crypto supporter Cynthia Lummis described the collapse of FTX as a wake-up call for congress, according to The Financial Times. 

During an interview at the Financial Times’ Crypto and Digital Assets Summit, Lummis said the bipartisan bill she introduced this year would have prevented the FTX collapse as regulators would be able to see if an exchange fell below the threshold “Immediately.”

“Those are things that had they been in place for FTX, would have set off alarm bells, that would have created regulatory enforcement actions and reviews by federal regulatory agencies,” she explained.

Meanwhile, in an on-stage talk at the University of Nicosia as part of a Binance Meetup Nicosia, Binance CEO Changpeng Zhao said he believes regulation is a way to help the industry develop, “protect consumers” and apply consequences to those caught breaking the law.

Stephanie Link a Chief Investment Strategist and Portfolio Manager at investment advisor Hightower Advisors, has called for more regulation as well, stating crypto is “Broken and irrelevant” until there is regulation.

Tom Dunleavy, a senior research analyst from crypto analytics firm Messari gave similar pro-regulation sentiment in a Nov. 28 post on Twitter, noting that clearer regulation around crypto will pave the way “for massive flows” of new investors.

“The biggest concern institutional investors have with investing in crypto is the uncertain regulatory environment,” Dunleavy said.

The crypto analyst cited the Coinbase-sponsored 2022 Institutional Investor Digital Assets Outlook Survey which found just over half of the respondents considering investing in crypto were concerned about the uncertain regulatory environment.

Related: FTX collapse put the Singapore government in a parliamentary hot seat

Last week, banking and financial services JP Morgan in a Nov. 24 note said that it expects there to be more urgency to get a consistent framework in place in the wake of FTX’s collapse.

According to the firm, regulations are likely to be imported from the traditional finance system, “Thus causing a convergence of the crypto ecosystem towards the traditional finance system.”