The fallout of the FTX exchange will be wide-reaching as the year of crypto contagions continues. Industry leaders are citing a lack of regulations in the U.S. for the incident.
Millions of retail and institutional crypto traders have lost money this week. The world’s second-largest centralized crypto exchange, FTX, has collapsed following a cascade of withdrawals that could not be settled.
On Nov. 10, anti-crypto Senator Elizabeth Warren took to Twitter in a rage. She said that much of the crypto industry “appears to be smoke and mirrors” while calling for “more aggressive enforcement.”
In response, Coinbase CEO Brian Armstrong pointed out that FTX dot com was an offshore exchange not regulated by the SEC. He added that the SEC has failed to create regulatory clarity in the United States. As a result, many American investors and 95% of trading activity went offshore.
“Punishing US companies for this makes no sense,” he added.
Regulatory Crackdown Incoming
Head of Coinbase exchange Vishal K. Gupta added that the U.S. crypto market makes up less than 5% of the total market by volume. “Lack of clear and fair regulation has driven crypto trading offshore,” he noted.
Compound Finance founder Robert Leshner pointed out that FTX founder Sam Bankman-Fried had been advocating tighter regulations on DeFi.
“SBF spent months lobbying to kill DeFi, because he knew that transparent autonomous protocols were a threat to “trust me assets are fine” finance.”
Crypto analyst Zack Voell agreed, pointing out the irony.
“The man who spent countless hours in DC lobbying for stricter DeFi regulation was simultaneously fisting his clients with CeFi products.”
Binance CEO Changpeng ‘CZ’ Zhao stated that the FTX collapse has “severely shaken” confidence in the crypto industry. He added that this would trigger tougher scrutiny by regulators.
No Winners From FTX Fallout
Everyone will be a loser from this incident, as it has given global regulators the ammunition they need to come down hard on the industry. “Regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get,” CZ told his employees.
On Nov. 9, Binance pulled out of the FTX bailout deal in which it would provide liquidity to help the embattled exchange. The company cited “latest news reports regarding mishandled customer funds and alleged US agency investigations,” as a reason to withdraw.
In response to the FTX fiasco, Binance has increased its Secure Asset Fund for Users (SAFU) to $1 billion again.
Meanwhile, crypto markets have crashed to a new bear cycle low. Total market capitalization has dumped by 10% as more than $100 billion was flushed out in less than 24 hours. As a result, the figure currently stands at around $850 billion, down 72% from its peak this time last year.
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Source: https://beincrypto.com/crypto-executives-blame-lack-us-regulations-ftx-fiasco/