After the fall of FTX, which future for crypto currencies ?

What was FTX??

Ftx is an abbreviation of “Futures exchange” and was the second largest marketplace where you could buy crypto currencies. It was founded in May 2019 by Sam Bankman-Fried (SBM) and ?Zixiao "Gary" Wang. In July 2021, it was valued up to 18 billion dollars and almost 32 billion just days ago, but this month, the company triggered the voluntary “chapter 11” procedure of the law on… bankruptcies. According to most observers, it marks a turning point in the crypto world.?

How did it happen??

All began with the publication of an article in November in coindesk, a news site specializing in bitcoin and digital currencies. In this article, the author talked about a discovery that he had just made: the new token created by FTX, the FTX Token (FTT), was issued without any counterparty, and SBM used it to fill his new fund, Alameda Research, up to 40%! Insofar as the company that issues the currency also controls the company that is filled with the currency, the journalist denounces a conflict of interest. The loss of confidence that followed this article had a snowball effect. The first consequence was the abandonment of the purchase of finance, one of the biggest FTX’s competitors, two days before the great crash.?

What are the consequences ??

??? The society has little chance of staying active. However, it has a new CEO, John Jay III, and SBM, the former one, said that he was “optimistic” in the capacities of his successor to “favor what will be the best for the company whatever it is”. Broadly speaking, it could have a terrible impact on the whole crypto world. This sector is already seen as uncertain and it happens only months after the fall of Terra USD, a stablecoin. As yet, the main crypto currency, Bitcoin, is down 5 %, and the FTT has? already lost 80 % of its value since the announcement. Now, one of the main challenges for the other crypto marketplaces is to regain public trust. To do so, they are trying to be as open as possible about their reserves. For instance, Binance stated that it detained 475 000 bitcoins, 8 million ethers and 58 million binance coins. “Regaining trust will be hard, but what more can we do?” stated Binance’s CEO on Twitter.?

??? Also, it is essential to say that the High Council for Finance stability noted that this event had no systemic risk, meaning that it had little to no chance of expanding into traditional finance sectors because the two are not very connected. Though, as institutions become increasingly involved in the crypto sector, the council announced that international regulation would be necessary.?

There could be more to the story…

??? The company’s management is now becoming public, and it is not good to see: no proper books of accounts, insecure group messaging, use of software to conceal the use of client funds…When the company’s new CEO discovered that, he said: “never in my career have I ever seen such a complete failure on the levels of intern procedures control.” We are also discovering that there could be embezzlement: SBF would have received a 1 billion USD credit from… Alameda Research: its fund. Some things are also shocking to say the least. The company had no registers of the number of its employees: as for now, it is impossible to say how many members were in each entity of the company. Also, no actual organizational charts and team discussions were conducted on a messaging app that automatically deleted messages after a very short period of time. So, the problem could be broader than expected.

However, Europe is ahead of its time regarding Crypto legislations:?

??? The European Union created a new legislation, MiCA: Markets in Crypto-Assets, in June 2022. It is the first excellent jurisdiction to get such legislation in the world! From 2024, the new European legislation MiCA will be effective. Then, exchange platforms such as FTX will need to get an agreement from the market regulator before being allowed to conduct their activities. They will have to give guarantees such as equities, prove that they have systems to fight cyber criminality and have strict rules to avoid conflicts of interest. It is a significant shift in crypto regulations because this agreement is close to the banking one. With such legislation, the EU is trying to avoid events like ftx’s bankruptcy from happening again. And now, Stephan Berger, a member of the economic commission of the European Union, even asked for a “Worldwide MiCA '' because, according to him:” Europe did the first step; it is now America’s turn.”