“This is a great learning moment for the industry,” said Hayden Adams, founder of UniSwap, the world’s largest decentralized exchange (DEX). “the fact is [FTX founder Sam Bankman-Fried] capable of doing [what he did] Explain that he is building a concentrated A product he has complete control over. “
Unlike traditional exchanges, which let people exchange common currency for cryptocurrencies and store assets on behalf of customers, decentralized exchanges never control customer funds and transactions are conducted on a peer-to-peer basis. According to Adams, this decentralized model removes the middleman risk that got FTX into trouble.
From a user experience perspective, UniSwap is still a work in progress. “If you compare us to the Internet, we’re still in the dial-up era,” Adams said. But he believes that decentralized exchanges will in time replace exchanges like Binance as the go-to tool for crypto trading.
No steps taken by cryptocurrency exchanges will avoid the period of heightened regulatory scrutiny that is now expected to begin.
Efforts to regulate cryptocurrency firms have so far been slow, in part because of the complexity of the underlying technology, according to Charley Cooper, former chief operating officer of the U.S. Commodity Futures Trading Commission (CFTC). But the scale of the FTX debacle could ignite a fire under the watchful eye of global regulators.
Some point to multiple high-profile crashes in traditional finance that could provide a useful precedent for cryptocurrency regulation. Justin Sun, founder of the TRON network and member of Huobi’s global advisory board, said that crises for financial institutions are usually accompanied by “increased regulation and scrutiny” [that] help strengthen the industry”, and “it is almost certain that the virtual asset industry will follow the same path. “
For the past two years, the EU has been working on a new set of laws for crypto organisations, called Markets in Cryptoassets (MiCA), aimed at protecting consumer money and financial stability. Details are now finalized and ready for a vote in February 2023.
If passed, MiCA would prevent cryptocurrency firms from using accounting tricks to blur the line between their own money and client money, an offense that appears to have played a large role in FTX’s downfall. “If MiCA is enforced, [the FTX collapse] It’s not going to happen this way,” said Stefan Berger, a German member of the European Parliament (MEP) who is leading the new legislative effort. “The FTX case is crypto’s Lehman Brothers moment. What the crypto space needs now is trust, and to build trust you need clear rules and regulatory clarity. “
Meanwhile, in the United States, the Biden administration first outlined plans to regulate the crypto industry in September. The new framework aims to combat fraud and ensure financial stability, while leaving enough room for innovation and entrepreneurship. However, this is a difficult balance to strike, and questions remain about which regulator should take the lead, the SEC or the CFTC.