The FTX breakdown created a high level of doubt and fear among crypto investors and users. Last week, the crypto market was filled with uncertainty for crypto asset prices. Investors are afraid to make a move on cryptocurrency after facing huge losses in the recent FTX collapse. So the White House is making decisions to implement strict cryptocurrency regulations in the United States. Now is the time for the administration to provide clarity on the cryptocurrency industry.
The Story Of The FTX Collapse
On November 11, the biggest collapse happened in the crypto market. FTX, the world’s second-largest crypto exchange platform, valued at $32 billion (USD), faced a sudden downfall in the crypto market. FTX filed for Chapter 11 bankruptcy, and the CEO of FTX resigned from his position.
The United States Securities and Exchange Commission (SEC) has started an investigation on how FTX manages the users’ funds and its crypto lending activities. According to the reports, Sam Bankmman-Fried of Alameda purchased FTT tokens at a lower price. The entity waited a long time to increase the price of FTT tokens. After some days, Alameda started borrowing “real money” by using these highly inflated FTT tokens as collateral. FTT lost up to 90% of its value this week. It led Binance to pull out of the bailout deal with FTX.
FTX, based in the United States, increased its revenue by 1,000% between 2020 and 2021. At the end of January 2022, FTX released data that shows the company completed a $400 million (USD) Services C fundraise, which resulted in increasing the valuation of the FTX by up to $32 billion (USD).
At the mid of February 2022, the FTX exchange’s per-day trading volume was $10 billion (USD). But the price of cryptocurrency shows a rate of decline in 2022, resulting in a reduction of the FTX network by up to $8 billion (USD).
Cryptocurrency Regulations In The United States
The United States regulators want to know why the FTX faced such a huge crash recently. On the basis of the sudden FTX downfall in the crypto market, US lawmakers are preparing a bill on regulating cryptocurrencies in the United States. The White House is taking steps in the crypto market to avoid a repeat of the FTX situation in the crypto market. The special panel was investigating the liquidity issues of FTX.
The lawmakers of the United States are under pressure to draft clear and rigid laws that can protect future digital users from facing the difficulties that recently happened with FTX. Joe Biden told the administration that it is time to introduce cryptographic regulations in the country. He directed lawmakers to draft legislation to regulate cryptocurrency.
Recently, Janet Yellen, US Treasury Secretary, officially stated that the country needs rigid regulations on the crypto industry. The lawmakers also accepted the idea of Janet Yellen; they said now is the time to implement new regulations on cryptocurrency.
Sherrod Brown, Chairman of the Senate Banking Committee, stated, “It is crucial that our financial watchdogs look into what led to FTX’s collapse so we can fully understand the misconduct and abuses that took place. I will continue to work with them to hold bad actors in crypto markets accountable.”
The House Committee Sent A Letter To FTX
Raja Krishnamoorthi, chairman of the subcommittee on economic and consumer policy, sent a letter to the former and current CEOs of FTX, asking them to produce documents related to the exchange’s finances on December 1. He demanded the entity produce information related to its finances, current crypto holdings, and balance sheets from before FTX filed for bankruptcy on November 11. Krishnamoorthy wants to know how the company will repay the users’ funds.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.