In a report, the investment bank said auditing and transparency needed to be specifically addressed.

JPMorgan said that the collapse of FTX could serve to drastically speed up the regulation of cryptocurrencies, a belief shared by other market players.

The investment bank detailed the events leading up to FTX’s liquidity crisis and bankruptcy in a recent report. Although characterized as a “major short-term reversal,” JPMorgan emphasized a “silver side of the sudden and unexpected collapse in FTX.”

Given the publicity surrounding the collapse and subsequent revelations of unprecedented impropriety, JPMorgan believes authorities will speed up sweeping regulations. It highlighted similar banking regulations that followed shortly after the 2008 global financial crisis.

JPMorgan added that this comprehensive reform would facilitate the adoption of Blockchain technology by financial institutions and the mainstream.

JPMorgan Emphasizes Transparency

The investment bank also flagged points of concern that require special attention. JPMorgan said that more auditing and transparency should be required, both at the exchange level and at the stablecoin level.

One of the reasons that FTX’s collapse has been so shocking is the extent to which its questionable methods, especially in handling client assets, have been obscured.

Consequently, major exchanges such as Binance presented serious evidence that they were still holding their clients’ assets. Several provided their cold wallet balances, as they sought to produce a more complete proof of reserves via a Merkle tree algorithm.

JPMorgan acknowledged these efforts in its report. Regarding regulations, it also suggested creating a framework that allows companies to easily provide this type of transparency.

While the crash has galvanized “crypto-skeptics,” JPMorgan remains optimistic about the prospects for the technology. Earlier this week, it registered a trademark for a digital wallet.

In the report it also pointed out that centralized entities were responsible for the recent crashes, rather than decentralized protocols.

FTX Collapse Accelerated Reform

Many other participants, both within the traditional financial and cryptocurrency markets, share the belief that this incident will accelerate reform. Earlier this week, the Bank of England urged further cooperation to establish a comprehensive cryptocurrency framework following the FTX collapse.

Deputy Governor Jon Cunliffe also said that doing so would allow institutions to offer consumers the benefits of Blockchain technology.

Recently, MicroStrategy founder and Bitcoin advocate Michael Saylor also expressed a similar sentiment. Saylor told CNBC that recent events will “strengthen the hand of regulators” and “accelerate intervention.”

Saylor expected this to take the form of regulators providing a path for consumers to register digital securities. Saylor said that the market would consolidate around fewer “registered tokens,” allowing the industry to “grow much faster.”

By Audy Castaneda


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