The cryptocurrency industry faces a 2008-style crisis that will lead to a much-needed regulatory crackdown, cryptocurrency industry executive Changpeng Zhao warned on Friday.
“It’s devastating for the industry. Consumer confidence is shaken. We are a few years late,” Zhao, CEO of cryptocurrency exchange Binance, said during a conference in Indonesia.
The Binance boss, known as CZ, was speaking amidst the impressive implosion of rival FTX, which filed for bankruptcy just hours later.
“We just saw another major player go down,” said Zhao, who noted that this meltdown follows the downfall of Celsius, Voyager, Three Arrows Capital and other cryptocurrency companies.
Zhao was a key player in FTX’s downfall. Binance reached an interim redemption deal with FTX earlier this week, but that transaction almost immediately fell apart, paving the way for Friday’s bankruptcy filing and the resignation of FTX founder Sam Bankman-Fried.
The moderator noted that the cryptocurrency turmoil looks a lot like the 2008 global financial crisis, which toppled Bear Stearns, Lehman Brothers, and other major Wall Street players.
“It’s probably an accurate analogy,” Zhao said.
He urged regulators to look beyond anti-money laundering rules and know your customer (KYC) and focus on the operations, business models and reserves of exchanges like FTX.
“Regulators will rightly scrutinize this industry much, much more, which is probably a good thing to be honest with you,” Zhao said. “In the short term, it’s very painful for retail investors… We feel that pain. But in the long run, this is another wake-up call to say, ‘Look, we’re in a new industry. There are a lot of risks and we need to learn to deal with those risks.”
Zhao also detailed his interactions with FTX, saying his company decided to divest its holdings in FTT — an illiquid token backed by FTX — after a report by CoinDesk raised questions about the balance sheet of FTX’s sister hedge fund.
“This problem has not been created in the last three days,” Zhao said, adding that the problem has been around for much longer.
Binance CEO accused FTX of “misappropriating” user funds.
Bankman-Fried, the 30-year-old crypto prodigy behind FTX, said on Friday that he is “really sorry” for what happened at his company.
“I’m getting all the details together,” Bankman-Fried wrote on Twitter, “but I was shocked to see things unfold the way they did earlier this week.”
Source: CNN Brasil
Joe Jameson, a technology journalist with over 2 years of experience, writes for top online news websites. Specializing in the field of technology, Joe provides insights into the latest advancements in the industry. Currently, he contributes to covering the world stock market.
