Binance CEO Changpeng Zhao speaking at a press conference during Web Summit 2022.
Ben Mcshane | Sportsfile | Getty Images
Binance’s agreement to salvage rival cryptocurrency exchange FTX from collapse shows how no one is safe from the chill of crypto winter, according to industry experts.
Prior to this week, FTX was the fourth-biggest exchange, processing billions of dollars in daily trading volumes, according to CoinMarketCap data. Its CEO Sam Bankman-Fried had a high profile in Washington, D.C., appearing in Congress to testify about the future of the crypto industry and committing millions in political donations.
Despite this, not even FTX was immune from the downturn in digital assets. It’s something even Bankman-Fried had recognized, telling CNBC previously: “I don’t think we’re immune from it.”
And, sure enough, on Tuesday his firm signed an offer from Binance to be acquired by the company for an undisclosed amount after facing what it called a “liquidity crunch.”
“It shows that no one is too big to fail,” said Pascal Gauthier, CEO of crypto wallet firm Ledger. “FTX seemed untouchable.”
The expression “too big to fail” was used during the 2007-2008 financial crisis, and referred to regulators’ determination then that certain institutions could not be allowed to go bankrupt, because of the danger such an outcome would pose to the wider financial system.
Multiple financial institutions received taxpayer aid in the wake of the collapse of Lehman Brothers that year.
эле, эмне болду?
A lot can change in a day — especially in crypto.
His comments came after a CoinDesk баяндамасы that said Alameda Research, Bankman-Fried’s quant trading firm, had liabilities exceeding its assets, most of which were reportedly in FTT, FTX’s native token.
A day later, the 32-year-old entrepreneur, who had styled himself as a “акыркы насыя берүүчү” figure in the struggling crypto sector, announced he would sell the exchange he co-founded three years ago to Binance, the world’s largest crypto exchange.
The debacle highlights something economists have long cautioned about when it comes to crypto: While the industry may be worth billions of dollars — it was once 3 триллион долларга бааланган by CoinGecko — in reality, its size is not yet of a “systemic” scale where regulators would feel the need to intervene if a company fails.
And, unlike the banking industry which is heavily regulated, crypto is not yet subject to regulations in the U.S. or other major countries, although that’s expected to change soon as jurisdictions like the European Union bring in new rules.
Crypto’s ‘Lehman moment?’
The debacle highlights how the crypto industry is becoming more centralized and straying from its decentralized roots, according to Gauthier. терминалдарда and other digital coins are “designed to be decentralized and not rely on a middleman,” he said.
“FTX is a very big warning for everyone,” Gauthier said in an interview on CNBC’s Squawk Box Europe Wednesday. “You can’t just wait for the next value proposition to fail.”
Кийин эмне болушу мүмкүн?
Earlier this year, Celsius, the crypto lending company, банкротко арыз берген after a plunge in the value of the tokens terra and luna rendered it unable to process customer withdrawals.
Crypto fund manager Three Arrows Capital and broker Voyager Digital also subsequently fell into bankruptcy, highlighting the interconnectedness of various players that owed one another money.
Some traders are worried Solana, a blockchain platform competing with Ethereum, might be the next crypto player to be tested by the market selloff. Solana’s sol token sank over 30% Wednesday over fears about its connection with Alameda Research. Alameda owns more than $1 billion worth of sol, according to CoinDesk.
“Is this the end of [the crypto contagion] or will there be any further dominoes to fall? It’s anyone’s best guess,” said Gauthier. “People should not wait to find out.”
On whether Binance might itself be vulnerable to collapse one day, Gauthier said he thinks people should be “reasonably worried” but added the firm has a “relatively solid value proposition.”
Ayyar said the FTX situation will likely add greater impetus for the largely unregulated crypto to be regulated.
“Crypto has been growing in terms of usage and utility and regulators will continue to be forced to take a more active stance on ensuring that platforms play by some rules and structure,” he told CNBC.
Source: https://www.cnbc.com/2022/11/09/binances-rescue-of-ftx-shows-no-crypto-company-is-too-big-to-fail.html