Something changed in regulators’ minds after the November crash of the FTX crypto exchange.
After watching local exchange Atom Asset Management put a freeze on withdrawals following the fiasco, Hong Kong Finance Secretary Paul Chan Mo-po announced that “insiders can no longer claim they are above regulation or that governments just don’t ‘get it’. The hype has turned out to be just like any other financial manias of the past”.
Similarly, Mark Branson of Germany’s biggest regulating body BaFin said we should abandon our present tolerant approach to crypto, which “just let the industry grow as a playground for adults. We’ve seen the self-regulated world. It will not work.”
FTX seemed to be the straw that broke the camel’s back because officials are fed up with the present state of regulation in the industry. At the same time, Paul Chan Mo-po conceded that crypto is “unstoppable”, and Andrew Griffith of the UK Treasury mentioned that “we’d be foolish to ignore the potential of the underlying technology”.
Regulation, then, should not only function to deal out slaps on the wrist. It should foster an environment in which crypto assets can safely and effectively flourish. Julia Leung, the next chief of Hong Kong’s Securities and Futures Commission (SFC), likens proper regulation to a cocoon. “Some say the cocoon is limiting innovation and development,” she explains, “but like all good regulation, it will help fintech firms and their services to incubate”.
CFD online trading with cryptocurrencies has been directly impacted by not only the FTX collapse but also the bankruptcies of big crypto firms earlier in the year. Join us for a taste of some of the most current attitudes on the issue.
The Senate Hearing
Recently the US senate’s banking committee met to discuss the extent to which lack of regulation was responsible for the FTX crisis. Senator Elizabeth Warren insisted strongly that new legislation was needed to combat money laundering in the industry. “Crypto doesn’t get a pass to help the world’s worst criminals – no matter how many television ads they run or how many political contributions they make”, she declared.
Senator Cynthia Lummis wanted to make a distinction. “Let’s separate digital assets from corrupt organizations. FTX is good old-fashioned fraud”, she said. However, there was evidence that fraud was more widespread in the industry. Four witnesses consulted at the hearing implied that many crypto firms engage in fraudulent activities on a systematic basis. Federal prosecutors had accused FTX CEO Sam Bankman-Fried of defrauding consumers and using their funds to pay off his own debt since 2019.
Ashley Alder, newly in charge of the UK’s Financial Conduct Authority (FCA) has adopted a no-nonsense approach to the problem. Crypto platforms are, in Alder’s experience, “deliberately evasive. They are a method by which money-laundering happens in size”. The FCA’s job is to regulate 50,000 financial service providers in the UK in order to ensure stability in the industry and consumer protection. They were granted more power over the local crypto space at the beginning of December by the UK Treasury. UK’s Prime Minister Rishi Sunak indicated in April this year that he wanted to act for the protection of the industry, saying, “It’s my ambition to make the UK a global hub for crypto-asset technology”.
Julia Leung, Alder’s successor in his recent position as chief of Honk Kong’s SFC, said she was in the process of tightening the screws on local trading platforms and stablecoins, and also trying to stamp out money-laundering in the industry.
Spring in the Air for Crypto Online Trading?
Mark Branson admitted a “crypto spring” might arrive when the present downturn times out, but he noted that crypto would have to be firmly connected with traditional financial institutions. He was also adamant that crypto issues and those related to online trading should be addressed globally rather than domestically. “It needs a worldwide solution”, he insisted.
If you ask Senator Pat Toomey, he will also tell you that regulation could offer hope to the crypto space. “There’s nothing intrinsically good or evil about software – it’s about what people do with it. Code committed no crime”, he remarked at the Senate hearing.
Hilary J. Allen of American University was also present at the hearing, and she pointed out that what makes embezzlement possible in the industry is the fact that crypto is “shrouded in opacity, complexity, and mystique”. Clear regulation could remove this stumbling block from the digital asset space by setting clear rules and establishing transparency.
Allen also said that regulation in the US was badly needed if only to preserve the value of crypto assets, which could otherwise depreciate to nothing. In the fast-paced world of CFD online trading, it helps to stay in touch with the broader backdrop behind the crypto space. Keep reading up on crypto legislation news all around the world in the weeks to come.