Why Crypto’s Future Remains Bright Despite FTX’s Collapse

[ad_1]

When FTX Group filed for Chapter 11 bankruptcy in US federal court last month, a statement submitted to the judge by the cryptocurrency trading platform’s new chief executive, John Ray, cited a complete failure of corporate controls and a complete lack of reliable financial information.

The road ahead will be difficult and will affect many people, directly and indirectly.

In its analysis of the 23-page bankruptcy filing, CNBC said the document indicated FTX had more than 100,000 creditors and its liabilities could reach $50 billion.

However, the extent of the collapse is unlikely to be known for many months, so those affected will also have to wait some time to find out the extent of their exposure.

We at Chainalysis offer them our deepest condolences. To that end, we are committed to the bankruptcy case and doing everything we can to help secure debtors’ assets.

As the business practices of FTX founder Sam Bankman-Fried come under investigation following his December 12 arrest in the Bahamas, I call on the cryptocurrency community to do two things.

First, have patience. The process is transparent and will provide answers.

The second is to draw an important distinction between any irregularities and the broader cryptocurrency industry, including the technology on which it is built.

All industries are operated by people. People make decisions on behalf of companies. And every industry has companies that abuse, fail, and defraud.

I ask everyone to remember that whatever happened at FTX was not a cryptocurrency or blockchain specific failure. It was, like many chess, human.

Technology Remains Transformative I firmly believe that cryptocurrency and blockchain will be to the exchange of value what the internet has been to the exchange of information.

It is a cross-border, instant and cheap way to trade in value.

It enables the tokenization of real-world assets that stablecoins once did for cash and it’s not hard to imagine that cars, houses, securities and more will follow. With such potential, demand will only increase.

What is needed, then, is not an overhaul of the infrastructure and platforms that power the cryptocurrency world.

Instead, this moment is an opportunity to take stock of our values ​​and advocate for a better and safer ecosystem.

An inflection point

It is when times seem darkest that monumental advancements in the cryptocurrency ecosystem take place.

The movement itself was created following the global financial crisis of 2007-2008, with the belief that the financial system should be better.

Watch: What is Bitcoin and how did it start?

Now, following FTX’s bankruptcy filing and continued bear market, this is when incremental changes in cryptocurrency are most likely to occur.

There is an imperative opportunity for the industry to harness the inherent transparency of blockchain to build an economic system that holds itself to a higher standard.

As with any new technology, cryptocurrency has attracted criminals and fraudsters, but they are not representative of the industry.

Chainalysis researchers are continually amazed at the level of innovation in use cases.

Cryptocurrency payments provide financial access to those who live far from cross-border money transfer hubs.

Digital assets serve as a store of value for countries suffering from hyperinflation. This year, we even saw the Ukrainian government raising funds through cryptocurrency transactions for its war efforts and to help its people.

There have been obstacles, but the technology itself is inherently strong and offers simple solutions where existing financial systems fail.

There have been hurdles, but the technology itself is inherently strong and offers simple solutions where existing financial systems fail.

Michael Gronager, co-founder and managing director of Chainalysis

It is an instantaneous, cost-effective, cross-border value exchange system, the demand for which is set to continue to grow.

With the dawn of Web3 technology, the bubble of cryptocurrency use cases will expand in countless ways that we cannot yet imagine.

We will see cryptocurrency applications that overcome the illiquidity of traditional assets, eliminating middlemen and fostering more direct relationships between sellers and their customers.

At the end of this path of decentralization of the business world, we will have enabled real community ownership.

Additionally, as the ecosystem matures, it becomes increasingly difficult for malicious actors to operate.

We have already proven that using cryptocurrency to launder money is an easy way to get caught.

With the right data, tools, guidance, and partnerships, the cryptocurrency industry can hold its companies and employees accountable for consumer protection by design.

Policy and outlook

In the near future, Chainalysis expects more discussions focused on consumer protection, including through regulations on custody, disclosure and market structure, such as the separation of activities such as custody and negotiation of operation under one roof.

Events such as the fall of FTX are usually accelerators for such policy-making, where renewed efforts are initially focused on strategic and effective actions at hand that can be implemented quickly, making a material difference. in the short and medium term.

Finding the right balance between consumer protection and innovation will require close collaboration between industry and policy makers in all jurisdictions.

Chainalysis will continue to advocate for regulatory frameworks that both protect consumers and empower innovators by providing access to data, expert analysis, and tools that contribute to a better understanding of recent events and their ongoing market implications. .

Until such regulatory reforms begin, the cryptocurrency industry should take it upon itself to self-regulate.

If one remembers the premium placed on trust by investors and customers, one can quickly see the incentive to work together towards standards of conduct.

These standards may include reserve reporting and other disclosures.

Cryptocurrencies in pictures

The crypto market, which includes currencies such as Bitcoin, pictured has lost $2 trillion in value in six months. Unsplash

Yes, there is work to do. But let’s not forget that the end of FTX does not mean the end of the industry.

People made mistakes and it ended badly. But other people are increasingly asking for cryptocurrency products and new ownership models.

Cryptocurrency is just getting started. The industry is famous for its ups and downs along an underlying steady adoption curve.

Our current moment is simply another opportunity to come out stronger. If we get the regulations right, we can reduce volatility in the sector and usher in a phase of stability.

Longevity comes next.

Michael Gronager is the co-founder and managing director of blockchain data platform Chainalysis

Updated: December 23, 2022, 04:00

[ad_2]