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- News Financial analysis
- Stock price forecast Crypto price prediction
- Forex trading strategies
- Technical strategies Basic strategies Popular strategies
- Daily strategies Short term strategies D&A strategies Long-term business strategies
- News Financial analysis
- Stock price forecast Crypto price prediction
- Forex trading strategies
- Technical strategies Basic strategies Popular strategies
- Daily strategies Short term strategies D&A strategies Long-term business strategies
The failure of FTX confirms that crypto regulation will be on the US legislative agenda in 2023. A total of six bills have been introduced in 2022 that focus on investor protection or compliance related to the crypto industry.
As the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) jostle for positions, the volume of votes in the chamber increases. Some want no regulation at all, but others in the industry and anti-cryptocurrency lawmakers believe that regulating cryptocurrency would legitimize its existence.
It is time to regulate cryptocurrency and all kinds of other platforms with some regulation. The United States has the strongest financial markets in the world, largely due to regulation. The regulations will boost the cryptocurrency markets.
The regulatory system that governs traditional finance is not created overnight. The system evolves along with the system, becoming more complete and stronger as needed. Accidents like FTX provide lessons for policy makers to improve the regulatory system.
The digital asset industry is still in its infancy, but topics like FTX are popular. Similar events were held at QuadrigaX and Gox Mountain. Regulatory controls should be initiated to prevent such large losses that damage market confidence. Five small, sensible steps you can take right now that don't even require a lot of vague knowledge.
Stablecoins play an important role in the digital asset ecosystem as they are designed to be flexible. Moreover, it is more convenient for daily transactions. However, these stable coins are not always very stable.
These stolkcoins must be minted at a 1:1 ratio to their base value, but stablecoin issuers are not required by law to hold a reserve equal to the available supply. When a stable coin's peg disappears, owners may rush to redeem their coins, creating a bankruptcy-like situation.
This is what happened with TerraUSD in May 2022. Recently, the US Securities and Exchange Commission found another strong threat to the platform, making the previous one even stronger. It is based on mint-and-burn algorithmic trading, linked to the LUNA cryptocurrency offering issued by Terra. Ironically, Sam Bankman-Fried is on trial for rigging the TerraUSD market, his failure to trigger the collapse of the industry and ultimately expose his other misdeeds at FTX.
However, none of this is necessary to determine whether a stable coin is backed by the dollar. The number of coins in circulation is equal to the number of dollars in reserve. Stablecoin issuers must hold 1:1 reserves with FDIC-insured banks.
FDIC insurance was born after the banks failed in the early eighteenth century. Quarterly reserve checks and real-time reports on mint burn activity should be mandatory. We have to do security and health checks with different banks in terms of the reserve size.
- Separate security and protection arrangements
Under the current market structure, the requirement for customers to deposit their money on an exchange is fundamentally flawed. You don't need to be a cryptographer to understand why this is a bad idea. Imagine if Nasdaq asked the Securities Exchange Commission to be the regulator?
Even if a person is completely honest, the problem of collateral damage remains. Many of these exchanges also participate in various types of lending. They are related to marketing and arbitrage. When you continue to trade and short on other exchanges, it is impossible to measure the relative risk on the exchange. This is because the aggregate risk of the stock market and the risks of other markets in which it participates play an important role in the risk rating.
If there is one lesson to be learned from the FTX debacle, it is that assets should be held by competent, regulated and secure third-party custodians until they are commercially viable. This creates a check and balance to check which reserve assets are under the control of any given exchange.
If trading and holding are separated during a crisis, the public may already know that FTX was in a hacked standby mode. After bankruptcy, it becomes easier to stop asset theft and embezzlement.
- Digital asset exchanges need to be 100% digital
Blocking direct trading of digital assets makes all on-chain or off-chain transactions of fiat assets verified. As a result, this enables accurate bookings to be confirmed. For the time being, reserve certification provides some clarity, but it is not a foolproof solution to distinguishing who is accredited and who is not, for two reasons.
No one can deal with a waiting order because it cannot be represented by a number. Lack of accountability cannot be proven, which is really the most important thing. FTX combines digital and digital storage components and far exceeds its promises.On all digital exchanges that represent fiat as a regulated stablecoin, proof-of-everything can become a reality. The last thing to deal with is the negative side.
By decentralizing and completely digitizing, a reasonably robust and efficient compliance system can be created. Currently, exchanges have no other option and are trying to do business in a hybrid world. Therefore, as a transitional period, it is better to combine guarantees and guarantees in digital form. After removing the old package, the ability to work in the digital environment is greatly improved.
- Control the use of universal wallets by exchanging digital assets
Omnibus stores the funds of multiple customers at one address. The benefit is that it simplifies basic custodian management and also enables efficient off-chain transactions.
However, the main limitation is that individual customers no longer have visibility into the transactions. They also have no associated risk information. In addition, it is not clear what happens to the money of individual customers during bankruptcy.
Omnibus wallets are considered acceptable only if each client of the qualified crypto-custody platform knows the exchange client in the overall pool and the assets are distributed in a way that protects each client from loss. The Custodian must be AML/KYC compliant for customer exchanges.
- Defining the topics of the digital age
The SEC still uses the old definition of securities, developed in the 1940s, which forces it to support enforcement efforts. Cryptocurrency creators have real questions about how the regulation applies to them, and they deserve answers.
Can the SEC update its definition and re-evaluate the importance of securities in the crypto era? Would it be difficult to provide the SEC with an updated definition, detailed guidance, and proper grandfathering guidance? Having this transparency will go a long way in protecting innovators and investors.
They should listen more to Commissioner @hesterpeirce who says the agency should not be running the app. Enforcement is obviously their job, but the burden of enforcement can be greatly reduced by providing proper direction in the first place.
What happened with FTX is a form of money laundering that has been practiced for centuries. The only connection between cryptocurrency technology and blockchain is that the lack of regulation creates a level playing field for fraudsters.
Diploma:
For now, the crypto community understands the SEC's recordkeeping rules. These regulations are designed to protect the crypto industry. According to this regulation, cryptocurrency storage and other platforms are required to separate security from business. The move was hailed as positive for the cryptocurrency industry.
The crypto industry needs a regulator aimed at preventing catastrophic investor losses. Designers and manufacturers can better design a system to meet regulatory requirements. When people can no longer play or deceive, the next conversation will be about more subtle issues and building something bigger.
It takes a concerted effort to get through this stage. FTX is not the first exchange to run into trouble. He is simply great. It's easy to shut it down and go back to business as usual. However, it means preparing the industry for further upheaval. In order to emerge stronger, it is important to take this opportunity to take a few simple steps to move the industry towards a new direction of success.