The collapse of crypto exchange FTX has led the UK government to fast-track its proposed measures
by Fred Heritage
In response to the recent collapse of the cryptocurrency exchange FTX, the UK government is on the verge of implementing a package of measures designed to regulate the cryptocurrency industry, placing limits on foreign firms selling into the country and restrictions around advertising.
The FCA will be handed “new powers to oversee the digital assets industry”, following its inspection earlier this year into the money-laundering controls of UK-based crypto firms, according to an article for Markets Insider by Carla Mozée, which draws on a previous report by the Financial Times.
The new measures are being fast-tracked and will enable the FCA to monitor cryptocurrency companies more closely, including how they operate and advertise their products. The plans will also set out how to wind down failing crypto companies.
Weathering a stormThe cryptocurrency industry has been “weathering a storm” following the “implosion” of FTX, which was once the world's third-largest cryptocurrency exchange, writes Mozée.
The collapse of FTX was caused by a massive sell-off from the platform’s users, following widespread rumours that the exchange was unable to pay its creditors, according to an article on the education platform IMD by Arturo Bris. FTX’s default has caused the prices of some of the world’s top cryptocurrencies to crash, with bitcoin losing 25% of its value in just a few days, writes Bris.
Increased urgency for regulation
But there may be an upside. In an article for CoinDesk, writer Will Canny suggests that such an event increases the need for enhanced regulations which may lend more credibility to the industry over the long-term.
The article cites a recent research paper from Bank of America analysts Alkesh Shah and Andrew Moss, who argue: “An increased urgency for regulation may enable greater institutional engagement, and a shift in focus (and capital) from speculative trading to projects with real-world functionality and companies with road maps to profitability may accelerate industry maturity.”
More regulatory frameworks are crucial for more mainstream adoption of cryptocurrencies, writes Canny, and a “coordinated global effort is required to discourage regulatory arbitrage and to safeguard consumers and investors.”
Too much?Recent regulatory pressure has resulted in Nexo, the crypto and digital assets lending platform, exiting the US. According to an article for CryptoPotato by Andrew Throuvalas, on 5 December the company announced that it would be phasing out its products and services in the country in the coming months because “the US refuses to provide a path forward for enabling blockchain businesses and we cannot give our customers confidence that regulators are focused on their best interests.”
The article says that despite having engaged with US state and federal regulators for the past 18 months, Nexo “no longer believes that such bodies can be negotiated with” because their legal positions were inconsistent and continued to change.