Daniele Servadei, co-founder and CEO of Sellix, says: “Exchanges are regulated already. What’s missing are regulations for the actual cryptocurrencies. The downfall of FTX will fast-track regulations for cryptos, even if it shouldn’t. In my humble opinion, those regulations will be based on something that wasn’t supposed to happen, and they might be too strict or even unnecessary. We will see how things pan out.”
Mark Basa, managing director of XWECAN Crypto, says: “This FTX debacle will affect future Crypto regulations because there were so many high profiled people involved. It has been reported that he created many backdoors to style crypto, and he’s done it with the help of high profile people who may not have known the extent of his criminal activities.
“In the long-term, the will affect centralised blockchains and centralised projects that actually more or less have their days numbered. When the average retail investor understands what a centralised service is, they are going to stay away from them, unless a better decentralized model is available.
“What we have to look at is that regulation is going to come to crypto while simultaneously people become more educated on decentralised services. Despite all the regulations on crypto, the government will have to find new ways of infringing on decentralised services. There are ways in which the government can really come after people if they want for almost any reason. While the Tornado Cash developer is in prison, people like Do Kwon and Sam Bankman-Fried are walking free. It makes no sense.
“What this is really about is time. Watch what happens over the next five or ten years. The need for consolidated decentralisation and DeFi is going to come. The government will try to play catch up as always, and regulators and big business will try to adapt. Eventually people will grasp the fact that somehow you can withdraw your money from centralised banks and put it in crypto.
“If you leave your with another custodial service like a centralized exchange, it is theirs. They own it, and they keep it just like if you leave your money in the bank versus if you store gold in a safe. The bank has the money. If I transfer 1 dollar from my bank to another bank, it is the same dollar in the same system. It doesn’t work like that in blockchain. The hardest thing for regulators is to ever catch. They want to protect people but also protect the centralised banking system that the whole world runs on.”
Viktor Prokopenya, London-based fintech investor and founder of Currency.com, Capital.com and VP Capital
“Over the last few days, FTX one of the major crypto exchanges collapsed with many investors now unable to withdraw their funds. There are current regulations in place for cryptocurrencies and for good reason. This is one of them. Regulation protects both investors and the industry by creating transparency and accountability.
As a result of this collapse, this may prompt previously crypto-friendly governments to over-regulate the industry through further restrictions. It’s like driving a car, if you slow the speed down to 5MPH, it does not mean you’ll have no accidents. It’s just going to prevent growth and maturation of the industry. We need the right responsible regulation, not a knee-jerk reaction.
Traders need to be extremely cautious about buying Bitcoin now as the price can fluctuate by thousands of dollars in seconds. Be careful and do not trade with leverage.”
Nigel Green of deVere Group
The FTX fiasco shows why regulation of the cryptocurrency industry is more critical than ever and underscores the importance of choosing the right crypto exchange, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The comments from Nigel Green of deVere Group follow news that Binance is stepping away from its plans to acquire FTX, leaving Sam Bankman-Fried’s crypto empire on the verge of collapse.
The reversal of plans comes one day after Binance CEO Changpeng Zhao, known as CZ, announced his firm had reached a non-binding deal to buy FTX for an undisclosed amount, saving the company from a liquidity crisis.
Nigel Green says: “The wider crypto ecosystem has been rocked by the FTX-Binance turmoil. The market is now in the red zone.
By Rashid Ali, co-founder and CEO of Exarta.
He says: “As the crypto market plummets due to Binance not going ahead with taking over FTX, it opens up the age-old question around trust. And at this moment, from what we gather, FTX haven’t been really honest about how they have been using customers’ funds, without their knowledge I must say.
“There are many exchanges who have been operating for many years successfully, yet the FTX juggernaut didn’t play by the rules and they ultimately paid the price alongside many customers who could lose their funds.
“There is always an argument about centralisation and decentralisation. I personally think the talk needs to be around some sort of regulation to ensure the exchanges do not mishandle the funds they have.”
Matt Smith, CEO and co-founder of compliance technology and data analytics firm, SteelEye, about the part Binance played in FTX’s fall from grace:
“The digital assets market has been rocked – once again – by the near collapse of one of the sector’s leading players, FTX. Despite huge inflows of investment, FTX was reckoning with a “liquidity crunch”. Surging withdrawals – reportedly amounting to $6 billion in just three days – plummeted the crypto exchange’s valuation, and FTT, FTX’s native coin, collapsed by 72% in just 24 hours.
“Six days before the collapse, CoinDesk reported a leaked balance sheet highlighting FTX’s dependence on its FTT token. Two days after that, the CEO of the world’s largest crypto exchange and main competitor to FTX, Binance, announced on Twitter that Binance would liquidate its holdings in FTT due to unspecified “recent revelations”.
“Once again, Twitter has played a role in influencing financial markets. Not unlike Elon Musk shifting Tesla’s share price via tweets from his personal profile, a likely driver for the fall in the currency was Binance CEO, Changpeng Zhao’s Tweet about Binance’s sale of its FTT holdings. This is a clear case of cause and effect. Though Binance’s official statement is “Every time a major player in an industry fails, retail consumers will suffer”, Zhao’s influence is undeniable, posing questions around how a CEO can plummet a competitor with a simple Tweet.
Yang Lan, co-founder of blockchain-based bank Fiat24, comments on the impact of this news:
“The banking industry has been around for centuries. As the industry has evolved, regulation has been refined. However, the crypto industry is new, and its regulatory system is far from perfect. On the other hand, crypto assets are also financial assets. Any institution that provides services to assets should be regulated like a bank so that the interests of the asset owner are protected.
“Although the FTX incident gives us a warning, there is still a lot of resistance for traditional banks to enter the crypto field. The market needs new and innovative banks, from day one. There is a new type of bank serving the crypto industry – one powered by blockchain technology.”
For banks looking to adopt digital assets, Yang recommends that they take the following steps:
“Although crypto assets have been widely accepted, their overall market value is still only $900 billion, which is 40% of Apple’s market value. For traditional banks, it is of utmost importance that the crypto business won’t bring any collateral damage to their existing legacy business. In addition to this, most countries in the world, except for a few, lack a clear regulatory framework for crypto businesses. Being a financial institution, they don’t even know what they should do.
“One solution would be to establish entirely new banks in countries with clear regulation, such as Switzerland, to serve only the crypto industry, gaining experience for the industry without putting the existing banking industry at risk.”
He adds: “The underlying technology of crypto currency, blockchain technology, is not a bank killer. It’s the opposite – it is a bank saver. If it can be used correctly, it will bring new life to the banking industry, which is now at a standstill. The most meaningful fintech innovation is the use of blockchain technology to greatly improve the efficiency of banks and massively reduce the operating costs.”
Nick Parfitt, AML Principle at Feedzai:
“Feedzai welcomes the news that the Financial Action Task Force (FATF) is planning to conduct more rigorous checks to ensure countries around the world are enforcing anti-money laundering (AML) laws around digital assets.
In the past week, the fall of FTX has called into question that of cryptocurrency regulation more broadly. While there is no overt suggestion of dirty money passing through FTX, it is worth considering whether the measures in place to combat digital asset financial crime are sufficiently robust.
Our recent State of Global Anti-Money Laundering Compliance Report of 636 AML compliance experts, representing 77 countries around the world, highlights the scale of concern. More than half (56%) of the AML professionals surveyed said the use of crypto and other non-complaint exchanges is the most common threat in terms of money laundering. However, despite citing crypto exchange abuse and money mule schemes as the biggest threats, just 26% of firms are currently monitoring cryptocurrency risks.
Our research shows that doing more to combat this challenge is a top priority for AML professionals, but there is certainly some paralysis as to how to move forward. The FATF’s actions will help to tighten enforcement at a national level. However, there is much more to be done to support AML professionals within their individual businesses and how they can implement more robust measures to tackle this threat.”
