Error-prone Crypto Exchanges Need Guardrails, Says FTX.US Manager

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(Bloomberg) – In order to protect investors from the type of lightning crash that hit Binance’s U.S. platform on Thursday, cryptocurrency exchanges need to take a page from the stock market.

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That’s the point of view of the chairman of the FTX.US crypto exchange, Brett Harrison. Although FTX.US has implemented circuit breakers and other trade limits, these restrictions are not required by federal regulators, Harrison said.

The lack of guardrails imposed by regulators – while appealing to many crypto advocates – also has its downsides, which were exposed on Thursday when the price of Bitcoin briefly plunged to $ 8,200 in a single minute. , compared to around $ 65,000 on Binance’s US stock exchange.

Read more: How Crypto Exchanges Could Stop Flash Crashes, If They Want To

“These are all self-imposed due to the lack of an existing regulatory regime for spot crypto,” Harrison said on Bloomberg’s “QuickTake Stock” streaming program. “We need to set the right rules for crypto exchanges to exist in this industry and be able to provide similar types of collateral to existing stock exchanges and futures exchanges.”

Under the oversight of the United States Securities and Exchange Commission, stock exchanges have circuit breakers in place, which briefly interrupt trading when prices fall too quickly. No such process is required for digital asset platforms. Instead, all trading rules and limits are implemented on an exchange-for-exchange basis, since the crypto industry does not have a central governing body.

The lack of such oversight may explain why the SEC was comfortable allowing the launch of the first Bitcoin exchange-traded funds backed by futures contracts this week – given that futures are trading on futures. regulated exchanges – but has yet to approve physically backed funds, Harrison said.

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“When regulators now look at crypto markets in relation to, say, stock markets, they ask the following questions: Are these markets mature and do they have all the safeguards in place that allow for orderly execution? Harrison said. “This is, for example, why the SEC has been comfortable with a futures-backed ETF, but not yet a spot-backed ETF.”

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