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.
“The global crypto market cap has fallen back to around $906 billion, down 11% over the past 24 hours. Bitcoin, the largest cryptocurrency, fell by 13% to around $17,00, which is a two-year low.”
The deVere CEO says there are three key takeaways from the “rollercoaster events” of this week.
“First, the fiasco highlights the need for sensible regulation of the crypto industry. Calls for greater regulatory scrutiny must be championed as digital currencies are set to play an ever greater role in the global financial system.
“Cryptocurrencies must come into the regulatory tent and be held to the same standards as the rest of the financial system.
“They are here to stay – and the market is only set to grow. There can be no doubt that regulation of the crypto ecosystem is required and, I believe, it should be a priority.”
The deVere boss, a long-time crypto regulation advocate, has previously noted that one of the best ways to address the regulatory issues is via the exchanges.
“Nearly all foreign exchange transactions go through banks or currency houses and this is what needs to happen with cryptocurrencies. When flows run through regulated exchanges, it will be much easier to tackle potential wrongdoing, such as money laundering, and make sure tax is paid.
“Second, the fresh turmoil at a major cryptocurrency exchange underscores the importance of choosing the right one. You should do your own research carefully.
“An exchange’s security protocol, liquidity, fees, ownership, history and user experience are essential checks you should make.
“And third, the cryptocurrency cynics, the Bitcoin bashers and the tired traditionalists will use these events as chance to attack.
“However, I would argue that many of them would be the same people who would have probably rebuffed the internet back in the 1990s.
“But future-focused investors will understand that digital is the inevitable future of finance. They will appreciate the intrinsic value of digital, borderless, global currencies, which have already changed the way the world handles money, does business, makes transactions and manages assets.”
Nigel Green concludes: “I have enormous sympathy with the users of FTX.
“The industry participants and financial watchdogs must now seize this moment as a point of inflection and work together in order to further shore up the sector and instil trust and transparency by means of sensible, workable regulation.”