One of the largest crypto exchanges, FTX, crashed overnight after it was caught mishandling its users’ funds. The impact of the bankruptcy was devastating within the market. Binance CEO CZ says the crash set the industry back a few years.
Binance CEO assesses market situation after bankruptcy
Crypto exchange FTX joins Terra (LUNA), 3AC, Celsius and Voyager, which filed for bankruptcy in 2022. The multi-billion dollar losses suffered by businesses and investors devastated the reputation of the market. Changpeng Zhao, CEO of Binance, one of the surviving exchanges, foresees a period of greater regulatory scrutiny in the near future. He believes that recent events have been devastating for the market and have destroyed investor confidence. Speaking at the Indonesian Fintech Summit 2022, CZ says the bankruptcy era has wiped out several years from the market:
I think we basically went back a few years. Regulators will rightly scrutinize this industry much, much more tightly, which, to be honest, is probably a good thing.
Regulations in crypto specifically revolved around Know Your Customer (KYC) and Anti-Money Laundering (AML). However, CZ reiterates that regulations should focus on exchange transactions such as business models and proof of reserve. As a result, he says tighter regulatory scrutiny on the exchange’s operations is imminent.
“Never use a token you create as collateral”
The collapse of FTX was a wake-up call for discussions about how to address risks in crypto ecosystems. CZ said it was a “lesson” that companies should not use their own-generated tokens as collateral when the events surfaced. Speaking specifically about FTX at the conference, he stated:
The last three days are just the revealing of problems. The problems took much longer. This issue was not created in the last three days.
Two big lessons:
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.
Stay #SAFU.🙏
— CZ 🔶 Binance (@cz_binance) November 8, 2022
CZ points out that the biggest red flag regarding FTX is Alameda Research’s financials full of FTX Tokens. Binance then decided to sell its FTX Tokens based on this. The next day, FTX CEO Sam Bankman-Fried reached out to CZ with a deal that “doesn’t make sense on several fronts.” At the same time, CZ was hoping to get an over-the-counter (OTC) deal to protect users:
The original intention was to bail out users, but then the news (which made us realize) that user funds were embezzled, especially US Regulatory investigations, we can no longer touch it.
Binance CZ says cold wallets need to be more accessible
CZ says increasing transparency and educating regulators on crypto audits and cold wallet information will make the industry much healthier. It also highlighted the need for easy tools to register private keys and other security functions. However, he argued that the crypto ecosystem will grow in gradual steps, not giant steps.
Taking a proactive approach to regaining investor confidence, Binance has released a new page titled “Proof of Assets” detailing the exchange’s on-chain activity for hot and cold wallet addresses. In an official statement, Binance said:
Our goal is to allow those who use our platform to be aware and make informed decisions that fit their financial goals.
“Bull market is coming soon,” Tron founder Justin Sun said
Justin Sun was among the names that supported SBF in the FTX collapse. He took action to help users stuck on the exchange to trade on the Tron network. “The bull market is coming soon,” he said on Nov. 12, after the bankruptcy became clear and the effect took over the market. Some of the prominent statements of the Tron founder are as follows:
I am still in the spirit of saving and helping for the suffering of my peers. Some of FTX’s TRX, BTT, JST, SUN and HT investors have been successfully bailed out. In the future, follow-up will continue as FTX enters the process of bankruptcy and restructuring. Contact the bankruptcy and restructuring side and the promise to save users will never change…There is not much precedent in the industry at the moment (bull market is coming soon), I hope the remaining people can follow the example of traditional finance
今天是入职火币第三十六天，孙哥又写日记了。众所周知，币圈发生了大事，FTX倒闭了，有人说是孙哥冥灯，进军哪个领域，哪个领域就立刻大跌，崩盘，其实孙哥也无能为力，毕竟火币和波场也不能不发展，未来随着咱们业务发展越来越好，不得不进入很多新领域，希望我未来总有一天能进军房地产吧（1/12）
— H.E. Justin Sun🌞🇬🇩🇩🇲🔥 (@justinsuntron) November 12, 2022
cryptocoin.com As you follow, it is estimated that the bankrupt FTX CEO is currently flying to Argentina. According to sources, at least $1 billion in client funds were lost in the FTX crisis.
