Home » Japan, US, Europe… Regulators everywhere are starting to crack down on FTX

Japan, US, Europe… Regulators everywhere are starting to crack down on FTX

by Tim

The beginning of a storm? Regulators around the world have started to react to the FTX case. While increased regulation of the industry is certainly on the agenda, what will be the consequences for FTX and the ecosystem as a whole?

Regulators begin to look at FTX

The FTX collapse has left the ecosystem in a state of shock. Between the aborted takeover of Binance, the arrival of Tron with great fanfare and rumours of providential help from Kraken, it is not easy to follow the frantic initiatives aimed at saving the company, which was still considered a flagship of the industry at the beginning of the week.

But flagship or not, regulators are not waiting, and they have started to get their teeth into it. Starting with Japan, where the Financial Services Agency (FSA) has ordered FTX Japan to cease its activities. Announced yesterday, the measure effectively forces FTX’s local branch to halt all services, and to keep its funds within Japan, so that they are accessible:

“[The FSA] has issued an order for [FTX Japan] to suspend operations, as well as an order to retain assets within Japan. “

In the US, SEC gets its teeth into it

Not surprisingly, the US SEC has also been looking into the matter. It explained last night that it was launching an investigation into FTX CEO Sam Bankman-Fried. A source close to the case told Bloomberg that the US financial regulator wanted to know whether SBF had violated the Securities Exchange Act.

As a reminder, the SEC had already been looking into FTX.US, the US branch of FTX, but the last few days have prompted the institution to extend the scope of its investigation.

The SEC’s involvement in this case is of course not a surprise. The institution is already known for its hostility to the sector, and yesterday it made it known through the voice of its president Gary Gensler that more regulation was necessary for the crypto industry. It will also be recalled that the Bahamas regulatory body decided yesterday to freeze the assets of FTX’s local subsidiary.

California regulator also looking into the case

Also in the US, California was the first state to react to the case. The Department of Financial Protection and Innovation (DFPI) has launched an investigation. It is inviting local people who have been affected to contact it directly, in order to gather complaints.

It showed its determination to get to the bottom of the case in a statement, explaining:

The DFPI takes its oversight responsibility very seriously. We expect anyone offering financial securities, any lender, or any other financial service provider operating in California to comply with our financial laws. “

According to the White House, President Joe Biden has also been briefed on the matter. Financial Services Committee Chair Maxine Waters has also urged consumer protections within the ecosystem.

Europe’s watchdog expresses concern about the situation

The Financial Stability Board (FSB), an independent financial stability watchdog, issued a warning through its European arm yesterday. After a meeting in Lisbon yesterday, the group issued a statement, which does not name FTX directly but talks about the crypto industry in general:

“In view of the various developments, decentralised finance, exchange platforms and so-called crypto conglomerates that integrate multiple functions deserve urgent regulatory action. “

The FSB includes representatives from the UK Treasury, the Swedish Central Bank, or French and German financial institutions. It can therefore be seen as a warning shot that will be followed by more concrete measures. For the moment, the European Union has not officially reacted, but there is no doubt that the knife will fall on this side as well.

A storm is coming

So the arrival of the regulators is just beginning, and the FTX case should continue to trigger a series of regulatory actions. What is also certain is that confidence in the ecosystem has been seriously shaken by this crisis. A consequence that Kraken CEO Jesse Powell bitterly regretted:

“[The situation is due to] sociopathic behaviour, which causes one person to risk all the hard work this industry has done over a decade, for personal gain. “

This is indeed the consequence that will certainly be the most pronounced – and least tangible – of the FTX case. The crypto industry will certainly have difficulty proving its reliability to regulators now that a giant like FTX has fallen so suddenly.

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