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

The US Attorney’s Office for the Southern District of New York was investigating FTX, although it is not known how far they would have gone. Meanwhile, the SEC also has an open case.

The more time goes by, the more is known about the FTX situation. Day after day, new information comes out that leaves the company and its board of directors in a very bad spot, which sheds some light on how poorly an exchange, valued at 32 billion dollars by January 2022, was managed.

Naturally, the fall of FTX moves the regulators to investigate what happened, but unlike other cases, these organizations had already traveled a long way, because they had been investigating the company’s actions for months.

This has been reported by Bloomberg, which assures that the office of the Attorney for the Southern District of New York, in charge of all financial cases in the country, was already working on a case against the company for possible money laundering. This action was based on the Law of Bank Secrecy to begin investigations pertaining to the movement of cryptos by the company.

How far the Investigation Had Gone is Unknown

The Attorney for the Southern District of New York would join the Securities and Exchange Commission (SEC) on the list of entities that have been investigating Bankman-Fried companies for months. It is not known if these organizations knew the entire financial situation of the company before the fall, but it is known that they are currently working together with the new CEO of the company to find out more about what happened.

Until now, and as reported in Bloomberg, it is known what has been declared by John J. Ray III, CEO of the company, who explained that Alameda Research, Bankman’s other company, would have lent up to one billion dollars to FTX, an amount extremely high for company accounts.

This does not mean, however, that the case will not advance further. The Southern District Prosecutor’s Office is the one that has handled most of the large cases of financial fraud and is responsible for the most important investigations in the crypto world.

This has given it an advantage by having the support of organizations such as the FBI and other entities. regulators. For this reason, one should wait until further progress is made in the case to find out everything they hid from FTX.

SEC Has an Open Case Against FTX

The U.S. securities regulator had been investigating crypto exchange FTX and its handling of customer funds amid a liquidity crunch, as well as its crypto-lending activities, a source with knowledge of the inquiry said last week.

Gary Gensler, Chair of the U.S. Securities and Exchange Commission, had previously expressed concerns about whether crypto platforms were properly segregating assets, and trading against their customers with their market-making activities.

By Audy Castaneda