The Future of Crypto World after FTX Collapse

• The collapse of FTX has raised serious trust issues in crypto world resulting that VCs are not going to be as likely to invest
• Crypto community seems divided into two camps: some calling for strong regulations by traditional regulators; others in favor of parallel decentralized ecosystem unregulated by conventional policymakers
• Regulators should consider different regulations for centralized and decentralized crypto exchanges
• Binance is in the favor of self-regulated crypto industry

The collapse of FTX has raised serious concerns for centralized crypto exchanges. The speculative bets and fraudulent behavior of Sam?Bankman-Fried (founder of SBF)?has resulted in a loss of billion dollars of crypto investors. Even in last year industry witnessed many collapses, but many feel that this was because the projects were not legit. Here is more of a project that was really performing fraudulent activity. And again, there was this lack of transparency. With most of the other projects, there was this transparency. If you wanted to know about Luna and do the analysis, then you could. And then you could have figured out that when the market is high, they’re going to do great, when the market is down there or not. With FTX, you could not really see what they’re doing with the funds. All this has created serious trust issues in industry. VCs are not going to be as likely to invest. Therefore, a lot of the funding is going to go away. However, it also means that regulation is going to be coming sooner rather than later. It is going to be stricter. Crypto community seems divided and there are those trying to build a parallel ecosystem that is decentralized and not regulated. And there are those who say that actually regulation is going to allow us to make it mainstream. And once it’s mainstream, you’re going to be able to do much more than what you’re doing now because you’re going to have more funding; you’re going to have more clients. There’s going to be overall a much larger ecosystem. But a lot of the decentralized projects felt that this is going to hurt them because when you’re thinking about trading in crypto for example, there is a lot of high-frequency traders in a way.

Binance is suggesting something different. Binance, the largest centralized crypto exchange is against any kind of regulation. However, they are in favor of self-regulated industry. They are thinking about proof and of reserve. They are proposing to create liquidity pools to handle the situations when reserves are not liquid. It’s interesting because it just shows that some of the regulation and some of the traditional financial markets’ processes that are there to secure the market are starting to be copied and imitated. However, they’re trying to do that in a more decentralized way. But then again, when you think about this pool, there’s nothing decentralized about it. It’s going to be one central authority that decides whether to give the funds or not.

Regulators should propose different regulations for centralized and decentralized projects You don’t want to just regulate the market and think about crypto as crypto. And the question is whether now when you are trying to go really quickly and regulate this market, whether we might be missing on that. And then just putting too strict rules that are not going to allow a lot of this DeFi world to actually be as innovative.