The Bank of England’s Deputy Governor, Jon Cunliffe, made a speech about the FTX collapse, claiming that it could have been caused by the FTT token run and that regulations should be implemented to prevent similar events from occurring in the crypto space in the future.
Cunliffe Fault’s FTX Operations
Cunliffe addressed the FTX collapse, stating that the cause of the collapse is not fully known, but that there were some glaring signs that were missed by regulators.
He went on to say that some activities carried out in organizations, such as lending, brokering and finances, are critical to the organization’s stability, and that the FTX fell short in all of these areas.
According to reports, FTX operated as a joint firm under one jurisdiction, with many sister firms led by Sam Bankmam Fried under the FTX exchange, one of which was Alameda Research. However, in a healthy and well-structured organization, this would be detrimental to the firm; these different sectors are meant to be operated by different departments rather than all being run by the same authority.
He also stated that FTX fell short in backing up its crypto assets, which were highly volatile and also failed to manage its activities well.
Crypto Ecosystem Need To Be Regulated
Cunliffe also, went on to address the Terra Luna Crash in May, linking it to the recent FTX collapse.
He stated that the experiences and turmoil that the crypto winter has exposed investors and firms to demonstrate that cryptocurrency is not a stable economy and should be regulated to maintain stability.
He emphasized that the instability in the crypto space is due to lawlessness in the space and the lack of a backed foundation for these virtual assets.
He advocated for bringing crypto and virtual assets under regulations that would govern their use and activities as a solution to this instability.
Cunliffe did not stop there but went on to provide three compelling reasons why regulation is critical.
He began with the most crucial point, which he identified as improving customer protection, by stating that although it is already risky for consumers to invest based on speculation and future predictions of a pump, this process should be made safer by fostering transparency.
The second directive urges businesses to take proactive steps now to avoid future pitfalls similar to this one in order to build a stable financial ecosystem for investors rather than waiting for a future FTX event to occur again before taking action.
Finally, he said that putting the crypto industry under regulation would encourage a lot of innovation that would spread from unregulated areas and be embraced broadly.
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