FTX breaks down a 'mini-GFC' but no deathblow for crypto

FTX breaks down a ‘mini-GFC’ but no deathblow for crypto

Do you think the bull market exuberance you mentioned is partly at the heart of all of the crashes we’ve seen this year? Have companies overtaxed themselves in good times?

Yes. I saw first hand what happened in Ireland when people thought the good times would never end. And so they did, they came to a crashing halt. And I’m not judging people for their choices – it’s a normal human thing to enjoy the good times you’re having.

I think what was missing, maybe within the crypto ecosystem, was enough experience and voices saying it won’t always be like this, things go both down and up. I think that reflects the relative youth of the sector. But even then, I don’t think anyone would have expected what has happened over the past week or so.

But I’ve been so vocal about the need for regulation and right now we have an industry that understands the need for protection when it comes to client asset segregation and proper custody solutions. We know this is a good way to go, and last year’s Senate report suggested it.

So we have an industry ready for that. They have a Senate recommending it. But we’re now in November 2022, a year after this report, and we haven’t really picked up enough momentum.

Is this lack of progress frustrating?

I don’t know if it’s frustration because I understand we’ve had to change governments since then and there’s a lot of work to do from a regulatory perspective.

But instead of trying to regulate the products and assets, we should try to regulate the bad behavior. I think the industry is behind it 100 percent because what happened with FTX wasn’t an issue with crypto, it was behavior.

Do you think the FTX collapse will have a major negative effect on crypto as a whole, especially on institutional confidence?

No, and the reason I say no with a great deal of certainty is that this is not a problem with bitcoin, it is a behavior problem. What I think we’re going to see as a result of this is an escalation of talks on regulation in Australia, the US and the UK. So institutional interest will remain, although it may calm down at least until the new year.

I doubt this is the death knell for crypto that so many outsiders predicted.

I hope we see amplification around the price of bitcoin rather than amplification of stories about the use of technology. I think that’s where the shift will come, and I think that’s a crucial narrative shift that the industry needs to go through in order to survive.

Does it change what type of crypto assets you could list as an exchange?

Well, we were ready to go live with Solana last Friday, and then obviously the wheels fell on FTX, which was quite closely associated with Solana. So we paused the launch until the smoke cleared and we can see where we are.

We have a few more launches in the pipeline and there is still a big appetite for new listings, but it’s safe to say the due diligence will be incredibly thorough.

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As someone who has worked through GFC, does this feel like a bit of a GFC moment for crypto?

Maybe a small one in the sense that there are bigger exchanges than FTX and a great many of them did the right thing, so this was more of a warning shot across the bow.

I don’t blame investors who have been feeling very down this week and worried about the future. That’s a normal human reaction. But I doubt this is the death knell for crypto that so many outsiders have been predicting.

After the FTX collapse, many major international exchanges released their reserve statements and had them audited. Should Australian stock exchanges follow suit?

Yes, and I think it needs to be on both sides of the ledger, both assets and liabilities. Such a level of transparency would certainly be useful in the short term, but I don’t know how useful it is in the long term. When I register with a bank, I don’t usually look at their balance sheet.

I think if you put in place proper regulation that requires exchanges to share financial information with regulators, I think that will fill the need over the long term.

But for us as an exchange, we’re actively looking for ways to prove our reserves, and we have a few different options. So hopefully we’ll get that out as soon as possible so customers know their assets are safe and backed by our platform.

Given the turmoil of the past week, what do you think this will mean for crypto in the coming months?

I would expect that we will certainly continue to advocate for regulation in Australia. We need the right protection here to look after investors in this asset class. And that doesn’t mean it doesn’t exist anymore and it’s made in such a way that people have to go to foreign exchanges to buy crypto. That’s just passing the buck on.

We need to get it right here in Australia to ensure we have these safeguards in place and also to develop the industry properly.

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