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It has been almost a year since the FTX collapse unfolded, becoming one of the most prominent crypto collapses in recent history and sending shockwaves through the industry. The collapse had all the makings of a blockbuster film; an eccentric CEO who would not stop implicating himself, accusations of embezzlement and misappropriation of funds, and millions in customer funds seemingly lost forever.
Now that its CEO Sam Bankman-Fried is standing trial and the dust is just starting to settle a year on, it is worth looking at how the industry is doing in its wake.
In terms of FTX customer funds, some progress has been made. So far, the company claims that it has found $7.3 billion in customer funds which could go towards repaying them once its legal issues are settled. This would be good news until you consider that customers had a reported $16 billion in the exchange as of the time it collapsed. This would mean that, a year later, less than half has been recovered, and this could be discouraging if no changes take place.
Then, we need to consider what the FTX collapse meant for crypto regulation. Once the scandal broke, several countries began prioritizing cryptocurrency regulation to stop any such incident from happening again. This included the United Kingdom rolling out plans to release new rules to govern the crypto industry.
Of course, the collapse also had a huge impact on those who use crypto for purposes outside of investments; those who use it as a means of payment. This includes individuals who enjoy online gambling at casinos that accept cryptocurrency options that include Bitcoin, as they faced uncertainties in their gaming experiences due to crypto's price fluctuations. Furthermore, for those who engage in cross-border transactions, the collapse can lead to significant challenges, affecting the cost and efficiency of international trade while also making it difficult to predict exchange rates accurately.
Then there was the SEC in the United States that spoke out about the developments. As John Reed Stark, former chief of the Securities and Exchange Commission’s Office of Internet Enforcement, said: “We’re in the midst of a regulatory onslaught against crypto. Every day, it seems like there’s a new lawsuit targeting the industry. The SEC is not going to stand idly by, especially when investors are at risk. Investors may not like the rules but, just like seatbelt laws, sometimes investors need protection from themselves.”
And this sentiment didn’t stop at a public statement. The SEC went on to initiate a crackdown on the cryptocurrency sector, going after industry giants like Kraken, Coinbase, and Binance. According to the lawsuits filed against them, they allegedly traded unregistered securities in the form of their listed cryptos. These court cases are still mostly unresolved and only add to the friction that has always existed between the crypto industry and US regulators.
One of the biggest legacies of the FTX collapse is the fact that crypto is seen with even more scrutiny by regulators. It also led to an air of pessimism around the industry among users. Keep in mind that last year also saw the collapse of the Terra ecosystem, which was a major crypto project. Having two prominent crypto projects collapse in a single year shook some investor confidence in the industry and also coincided with a crypto winter. Speaking of crypto winter, Bitcoin has since seen somewhat of a price recovery but has yet to enter a major bull run though it remains one of the most popular options for crypto users and many are rooting for it to make a comeback. Overall, the FTX collapse has led to some consequences that the industry is still reeling from today.
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