As The FTX Virus Continues To Spread, Calls for Control Have Grown Louder
As the fallout from the FTX collapse continues to ripple across the sector, crypto executives and lawmakers are becoming more vocal in their requests for industry regulation.
In the past day alone, Maxine Waters, the chair of the US House Financial Services Committee, stated that lawmakers would hold an inquiry on December 13 to look into the collapse of FTX, while Christine Lagarde, the head of the European Central Bank (ECB), termed regulation and oversight of cryptocurrency an “absolute necessity” for the European Union.
FTX Collapse; A Wake-up Call
According to The Financial Times, United States Senator Cynthia Lummis, who supports cryptocurrencies, said that the collapse of FTX should serve as a wake-up call for Congress on November 28.
At the Financial Times’ Crypto and Digital Assets Summit, Lummis said that the bipartisan law she introduced this year would have prevented the FTX collapse because authorities would be able to know if an exchange dropped 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.
A way Out for the Company Advancement
In contrast, Binance CEO Changpeng Zhao stated at a live presentation at the University of Nicosia as part of a Binance Meetup Nicosia that he thinks regulation is a method to advance the sector, safeguard customers, and impose penalties on those found in violation of the law.
According to Stephanie Link, a Chief Financial Strategist and Portfolio Manager at the investment firm Hightower Advisors, more regulation is also needed, claiming that until there is legislation, cryptocurrency is “broken and meaningless.”
Why do we continue to discuss crypto? Broken and Irrelevant. Until there is regulation.
— Stephanie Link (@Stephanie_Link) November 27, 2022
A Crypto Analyst Supports Binance CEO View
Tom Dunleavy, a senior research analyst at the crypto analytics company Messari, expressed a similar pro-regulation stance in a post on Twitter on November 28. He noted that greater regulation of cryptocurrency would open the door “for massive flows” of stockholders.
The biggest concern institutional investors have with investing in crypto is the uncertain regulatory environment
Clearer regulation paves the way for massive flows pic.twitter.com/2zBsi4AAXA
— Tom Dunleavy (@dunleavy89) November 28, 2022
“The biggest concern institutional investors have with investing in crypto is the uncertain regulatory environment,” Dunleavy said.
The cryptocurrency researcher highlighted the Coinbase-sponsored 2022 Institutional Investor Digital Assets Outlook Survey, which indicated that slightly more than half of respondents considering investing in cryptocurrencies were worried about the unclear legal landscape.
Adopting a Consistent Structures
Following the collapse of FTX, banking and financial services company JP Morgan stated in a note dated November 24 that it anticipates there will be increased urgency in putting in place a consistent structure.
The company claims that laws will probably be adopted from the conventional financial system, thus causing a convergence of the crypto ecosystem towards the traditional finance system.