With well-known crypto exchange FTX owing almost three billion dollars to fifty entities and the US midterms shedding light on the much-needed clearer market regulations, the cryptocurrency sector has been thrown through a loop in the last month alone.
But it doesn’t all spell doom and gloom for crypto. Here’s what’s been happening in the industry recently.
Crypto No Longer in the Top 10 Most Cited Risks
Even though advocates for traditional currencies keep dismissing the crypto ecosystem, the Federal Reserve Bank of New York (one of 12 in the country) published survey results showing 11 factors that are riskier than cryptocurrencies this year.
Everything from the continued Russia-Ukraine conflict to other geopolitical tensions to COVID-19 to the ever-increasing inflation has pushed crypto further down the risk scale than predicted. The report places the market at number 12, wiping it from the top ten.
On top of that, the same central bank noted the Terra ecosystem collapse. Those directly exposed to the eradication were knocked by economic downfall, some even declaring bankruptcy.
However, across the seas, India launched its CBDC, otherwise called the central bank digital currency, for the wholesale sector, with plans to debut a retail-oriented digital rupee in the near future.
Clearer Crypto Regulations Needed to Prevent Washouts
Until recently, FTX was one of the world’s largest crypto exchanges. But it declared bankruptcy this month after swathes of customers withdrew their funds following revelations about the company’s practices.
Brian Armstrong, the founder, and CEO of Coinbase, sympathized with those involved, mentioning everybody in the industry comes under fire when there’s a potential for significant customer loss.
He goes on to state that experts should look at the reasons behind the downfall and what can be done to prevent it from reoccurring.
Upon inspection, FTX’s collapse appears to be caused by unethical, less-than-reliable business practices, such as:
- Lending consumer assets without permissions
- Conflicts of interest between partners and collaborators
While these occurrences happen in traditional financial markets, the lack of regulations and transparent legislation related to the cryptocurrency sector is becoming more apparent during the current situation.
Therefore, traders, consumers, and industry professionals alike are calling for more official guidelines from the government and commissions.
At the moment, the US regulators haven’t published a workable framework for how lending, short selling, margin trading, and other activities should run safely in the cryptocurrency market, rendering them almost outlawed.
Instead of focusing on clear guidelines, the country has pushed enforcement to the top of its priority list — condemning companies for not following the regulations without actually outlining what the rules are.
Since the crypto industry could create a bright future of decentralized finance, experts are urging the government to develop smarter (not heavier) regulations. It will certainly propel the country — which has always considered itself the leader of new technologies/industries — past other economies.
Federal Law Enforcement Orders Paxos to Freeze $19 Million of FTX-Tied Crypto
Saturday, November 12, 2022, saw federal officials order Paxos, a cryptocurrency issuer, to freeze $19 million of coins tied to FTX, the now-bankrupt exchange.
The US Justice Department conducted an investigation into the unexpectedly rapid collapse of the crypto empire a few weeks ago, contacting Binance, a company previously seeking to purchase the exchange, to ask for details about the potential buy-out.
As one of the many results of the investigation, the court ordered Paxos-issued assets to freeze. The CEO, Charles Cascarilla, thusly froze 11,184.38 PAXG tokens that were on the FTX platform.
Afterward, Cascarilla issued a statement highlighting the matter’s accelerated evolution, expressing hope for more details to provide their customers.