FTX one of the biggest crypto-exchanges in the last few years has collapsed overnight and filed for bankruptcy last week, leaving many of its users unable to withdraw their funds and causing a chaos in the global crypto-scene.
The FTX case has highlighted once again a fundamental issue about the crypto-industry i.e. never use a token you have created as collateral, unless you have the cash available behind it for withdrawals.
Different stakeholders should also take some lessons from this collapse, including regulators and investors.
Most importantly, regulators should be in a position to continuously assess the financial position of systemic financial firms like FTX and they should always allocate their resources efficiently, in order to proactively identify issues before they arise. FTX possesses multiple licenses from regulators worldwide that unfortunately failed to identify the issues and risks.
As a result, one might expect increased regulatory scrutiny resulting from the FTX collapse including stricter requirements by the regulators before and after issuing any crypto-related licenses. In Europe, it now becoming even more essential for the EU Proposed Regulation on Markets in Crypto Assets (MiCA) to enter into force. EU lawmakers are expected to vote on the Markets in Crypto-Assets regulation bill (MiCA) by February 2023, however, the FTX case might create further delays. Furthermore, we might see enhanced and/or new crypto-regulations in other jurisdictions as well.
Last but not least, let’s hope that investors have now learned their own lesson; that is investing in only what they can understand.
The FiveComply team is consisted of a team of experts on regulatory compliance matters and can provide you with the latest updates about existing and upcoming crypto-related regulations worldwide.