The FTX debacle has brought crypto CEOs, academics, analysts, and politicians closer together than ever before on regulation.
As the fallout of the FTX crash continues to ripple across the sector, crypto executives and lawmakers are increasingly demanding crypto regulation.
Christine Lagarde, president of the European Central Bank (ECB), has called regulation and supervision of cryptocurrencies a “absolute necessity” for the European Union, while Maxine Waters, chair of the United States House Financial Services Committee, has announced that lawmakers will investigate the collapse of FTX on December 13.
The Financial Times reported on November 28 that United States Senator and crypto advocate Cynthia Lummis hailed the failure of FTX as a wake-up call for Congress.
During an interview at the Financial Times’ Crypto and Digital Assets Summit, Lummis said that the bipartisan law she offered this year would have averted the collapse of FTX because authorities would have been able to detect “immediately” if an exchange dropped below the threshold.
“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.
Binance CEO Changpeng Zhao said at a discussion at the University of Nicosia as part of a Binance Meetup Nicosia that he thinks regulation is a means to assist the business flourish, “protect customers,” and impose penalties to those who breach the law.
Stephanie Link, Chief Financial Strategist and Portfolio Manager at the investment advisory firm Hightower Advisors, has also urged for tighter regulation, noting that cryptocurrency is “broken and irrelevant” unless it is regulated.
Why do we continue to discuss crypto? Broken and Irrelevant. Until there is regulation.
In a November 28 tweet, Tom Dunleavy, a senior research analyst at crypto analytics company Messari, expressed a similar pro-regulation view, stating that better crypto legislation would open the way for “huge volumes” of new investors.
The biggest concern institutional investors have with investing in crypto is the uncertain regulatory environment
“The biggest concern institutional investors have with investing in crypto is the uncertain regulatory environment,” Dunleavy said.
The crypto analyst highlighted the Coinbase-sponsored 2022 Institutional Investor Digital Assets Outlook Survey, which revealed that slightly more than half of respondents contemplating crypto investments were apprehensive about the regulatory climate.
JP Morgan said in a note dated November 24 that it anticipates a greater sense of urgency to implement a uniform structure in the aftermath 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.”
