Crypto faces a crisis of confidence amid FTX collapse
Uk.YahooNov 11, 2022
Amid a rush of customer withdrawals that left the firm teetering on the edge of collapse, cryptocurrency exchange FTX announced Friday that it's filing for bankruptcy, with founder Sam Bankman-Fried stepping down as CEO.
Users began withdrawing their funds from FTX last week after an article appeared on the crypto news site CoinDesk suggesting that Alameda — a hedge fund owned by Bankman-Fried — held billions of dollars worth of FTX's own currency, FTT, from clients' accounts to use as collateral in further loans.
FTX was seen as one of the more reputable firms in the crypto world, and its founder was considered a Capitol Hill darling, having donated millions to political campaigns and helped write legislation around cryptocurrencies. This shocking twist — which will have ripple effects across the crypto world — brings all of that into question and renews calls for more regulation.
All of these problems stem from the lack of clarity provided by US legislators, which has driven 95% of the crypto market offshore. They are now largely powerless to retrieve the funds, and it makes no sense to further punish US crypto companies for these mistakes with a regulatory crackdown.
There's a 95% chance that FTX.US will default or delay for more than 120 hours on payment to at least one FTX.US user before 2023, according to the Metaculus prediction community.