As the long-awaited FTX trial begins, with Samuel Bankman-Fried scheduled to appear in court on October 3rd, there will undoubtedly be a lot of discussion on this topic. The claims and shock waves of the FTX’s collapse are being felt in practically every aspect of the cryptocurrency business. Samuel Bankman-Fried may be the face of the collapse and the only focus of attention throughout the trial, but he is only the tip of the metaphorical iceberg. Several of his former coworkers have pled guilty to charges and are cooperating witnesses, his parents have been implicated in (at least) unethical FTX activities, payments made to athletes are being sought by the bankruptcy court, and Stanford University has pledged to return millions of dollars in FTX pledges.
To say FTX messed up the Crypto space would be an understatement, and some have suggested that this one collapse has left the Crypto lobbying business in the United States years behind, even while other jurisdictions assert leading positions. As the courtroom drama unfolds, maybe supplemented by details offered by expert witnesses, it will inevitably dominate the Crypto space’s headlines. As exciting as these stories are, it is vital to remember that the FTX drama represents the end of an important chapter in Crypto, not a portent of things to come.
Compliance is important, but so is cryptocurrency.
Even with just the testimony supplied during FTX’s continuing bankruptcy and failed re-launch, it became clear that some, if not the majority, of the flaws at the exchange were not unique to Crypto assets. A lack of adequate internal controls over financial reporting and customer assets, the absence of a CFO or an external board of directors, and money commingling read like a laundry list of accounting problems rather than Crypto faults. When this is combined with the erratic manner in which Bankman-Fried attempted to defend himself against these claims, and maybe appears to be blaming former colleagues and legal representatives, the picture becomes obvious.
The message is essential for cryptocurrency entrepreneurs. If a company is to prosper in the cryptographer area, it must place equal emphasis on business fundamentals as it does on the Crypto product itself. Following FTX, there has been heightened attention on Crypto exchanges, stable-coin concerns, and every other facet of the crypto ecosystem. Investors and regulators have made it very obvious that, in order to attract financial resources and function successfully in the future, organizations must prioritize compliance and transparency over other areas of attention.
Boring Could Be Better
Coinbase has long been regarded as a staid and (some would argue) dull competitor in the Crypto exchange business, eclipsed by FTX’s flashy marketing and CZ’s online personality at Binance. With FTX in bankruptcy and Bankman-Fried on trial facing several accusations, and Binance facing legal difficulties as well as mass resignations from key leadership positions, being a so-called boring Crypto exchange appears to be becoming more enticing. Even the prudently managed and proactive Coinbase could not avoid the SEC’s enforcement arm, but it is reasonable to argue it is in a stronger position than its main competitors.
High-flying and volatile applications such as NFTs have plummeted to earth in the tokenized asset world, with as much as 95% of the NFT market having zero value, according to new research. Unfortunately for some investors, this should come as no surprise; the frothy and bubble character of the NFT industry was clear even as many cashed in on the hype. Stable-coins, long regarded as a dull compromise, are making inroads into mainstream individual and institutional usage, and are expected to outnumber PayPalPYPL +0.2% and MastercardMA 0.0% in total volume by 2023.
Finally, TradFi Is A Partner.
After years of hurling insults at each other, it’s wonderful to see TradFi continuing to invest in, work with, and develop blockchain and tokenized asset-related products and solutions. For several important reasons, the crypto community should rejoice. First, bringing in TradFi institutions will very certainly make regulatory and compliance discussions easier and more straightforward. Second, by integrating and collaborating with TradFi institutions, the chances of mainstream adoption and on-boarding of Crypto assets will improve.
Finally, the fact that TradFi is investing in the cryptographer market should be seen positively. If the world’s leading asset managers and financial institutions are committing intellectual and financial capital to these goods and services, it would appear that this sector is here to stay, despite the regulatory and reputation difficulties that have arisen.
FTX will continue to make headlines, but even if it does not represent the future of cryptocurrency, all market participants should remember the lessons learn from its demise.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.