In the wake of the announcement of one of the largest trading platforms for bankruptcy, calls have increased in the world to regulate the cryptocurrency markets, and its clients are threatened with losing their money and investments completely.
The exchange (FTX), which was until recently one of the largest cryptocurrency exchanges in the world, declared bankruptcy two days ago after revealing its trading practices that led to an increase in customer withdrawals without enough funds to meet the withdrawals.
In an article published by the American network “CNBC”, and seen by “Al Arabiya Net”, the CEO of “Coinbase” specialized in digital currencies, Brian Armstrong, said that “the fall of the (FTX) platform is the result of risky and unethical business practices, including conflicting Interests between closely intertwined entities, and decisions to lend clients assets without permission.
“In the wake of this week’s events, we are already seeing calls for more regulation of the crypto sector, with tighter restrictions on access and innovation,” Armstrong added. “.
Armstrong says that it has been difficult to deal with cryptocurrency regulation in the United States, as regulators have so far failed to provide a reasonable framework for how to provide these services in a secure and transparent manner, meaning that the wide range of financial products found in the cryptocurrency market, including Lending, margin trading, short selling, and other tools that are perfectly legal and regulated in traditional financial markets are all still unregulated in the cryptocurrency market, and as a result, American consumers and advanced traders alike have been dealing with risky offshore platforms outside of jurisdiction, and outside protection provided by US regulators.
Armstrong notes that more than 95% of the cryptocurrency trading activity that Americans do takes place on offshore exchanges.
He also points out that one of the reasons the FTX was able to do what it did was that it was operating in the Bahamas, a small island nation with very little regulatory oversight and the ability to oversee the financial services business, and that’s what tempted FTX. To take risks without fearing any repercussions.
In the long run, Armstrong says, the crypto industry has an opportunity to build a better system using decentralized finance and self-custodial wallets that do not rely on trusting third parties such as exchanges. Instead, customers will be able to trust the code and mathematics, and everything can be publicly auditable, but regulators need to establish clear rules that regulate the cryptocurrency market, encourage innovation, and protect consumers.
The CEO of Coinbase notes that in the world there are more than 200 million users of cryptocurrencies, in addition to that, some countries have begun experimenting with digital currency programs and accepting Bitcoin as a legal currency, while the United States has the opportunity to “take the lead by providing regulation clear business, or risk losing a key driver of innovation and economic equality.”
