Supporters of the DeFi industry have criticized the DCCPA, as it encourages centralization and plays the game of leading stock exchanges. Jake Chervinsky considers that no law in the US Congress could prevent an offshore company like FTX from bankruptcy.
More than a week later, the crypto industry has begun to suffer the aftershocks from the FTX collapse. There is growing fear about what measures the financial regulators involved in the case might take. If there was already instability regarding trust in the cryptocurrency sector, it should now be entirely in ruins.
Since Sam Bankman-Fried had a good relationship with legislators, the FTX case should be a disgrace to the politicians.
Changpeng Zhao Calls for More Self-Regulation in the Crypto Space
Many politicians, including Gary Gensler, the chairman of the SEC, spoke out immediately after the collapse of FTX. Although the official has punished and prosecuted various projects for months, he called for further regulation in the sector.
Many senators are introducing the Digital Assets Consumer Protection Act (DCCPA) in the US Senate to push clearly stated cryptocurrency regulations. However, advocates of the DeFi industry have criticized the proposal, as it promotes centralization and plays the game of leading stock exchanges.
They consider the law imposes the outdated and flawed design of the traditional financial world, which Sam Bankman-Fried defends. Meanwhile, Changpeng Zhao, the CEO of Binance, calls for more self-regulation by the other centralized players in the cryptocurrency sector.
Clearly-Stated Regulations Might Prevent Crypto Companies from Going Bankrupt
Sam Bankman-Fried joins Do Kwon, Kyle Davies, Zu Shu, and Alex Maschinsky on a long list of failures in the industry. Although none had legal consequences, the developer of Tornado Cash Code, an open-source software, went to jail.
Many regulators have suspicions about the decentralized financial system, but the target of their resentment is wrong. New centralized players converge their power and meet novel unregulated sectors of the crypto industry.
Unclearly stated regulations in key world jurisdictions have led many players into a bleak world. Brian Armstrong, the CEO of Coinbase, considers the new regulatory efforts from the EU, Hong Kong, and Singapore as positive steps.
Despite some shortcomings, the EU has set clear rules on how exchanges should handle customer funds. Stefan Berger, a member of the EU Parliament, believes future regulation will prevent other situations like the Lehmann Brothers case in the sector.
The Regulation of the Crypto Industry Requires Using Global Technologies
Since FTX was a Bahamas-based cryptocurrency exchange, it benefited from favorable legal provisions while having a US branch. Although Bankman-Fried said he ensured security on the platform in the United States, both went bankrupt.
According to Jake Chervinsky, the head of policy at the Blockchain Association, this is one of the worst problems in the industry. He thinks that no law in the US Congress could prevent an offshore company from bankruptcy.
Corruptible industry players should apply in the Bahamas, the US, the EU, or elsewhere to make globally coordinated legislation possible. Furthermore, trading platforms should be under scrutiny by regulators and their clients, which requires intuitive and accessible technologies.
By Alexander Salazar
