FTX Collapse Creating Strange Bedfellows
The fallout from the SBF/FTX collapse continues but it’s not entirely what we’ve expected. Yes, the usual suspects are pushing for harsher regulation, including now the G20 and President Joe Biden:
Last week, at the 17th G20 Heads of State and Government Summit, which was held November 15-16, 2022 in Bali, Indonesia, the world leaders present made a joint declaration that had some interesting things to say about the “crypto-assets ecosystem”.
In a joint declaration released by the White House on 16 November 2022, the G20 Bali leaders had this to say about crypto:
“We welcome ongoing work by the FSB and international standard setters to ensure that the crypto-assets ecosystem, including so-called stablecoins, is closely monitored and subject to robust regulation, supervision, and oversight to mitigate potential risks to financial stability. We welcome the FSB’s proposed approach for establishing a comprehensive international framework for the regulation of crypto-asset activities based on the principle of ‘same activity, same risk, same regulation’.
“We welcome the FSB consultative report on the review of its high-level recommendations for the regulation, supervision and oversight of “global stablecoin” arrangements. We also welcome the FSB consultation report on promoting international consistency of regulatory and supervisory approaches to crypto-assets activities and markets. It is critical to build public awareness of risks, to strengthen regulatory outcomes and to support a level playing field, while harnessing the benefits of innovation.
You can read the rest of the G20 statement here, but it’s exactly what you could expect.
What we didn’t expect is where some of the pushback is coming from. Easily the most surprising pushback against regulatory overreach came from crypto skeptic Peter Schiff.
Chief Economist and Global Strategist Peter Schiff took to Twitter and stated that “we don’t need more government regulation.” He further said that there is a need for more free market regulation and personal responsibility.
In detail, he mentioned that the NYSE (New York Stock Exchange) was established in the year 1792. Meanwhile, the SEC was not created until 1934. According to Schiff, Let’s end the Fed, government stimulus, subsidies, guarantees, and bailouts. We were better off without it.
This tweet was inspired by those calling for more government regulation in the wake of the SBF and FTX frauds. The beauty of free market capitalism is that it self-regulates. Competition for reputation, profit, and loss are better regulators than easily captured bureaucrats.
In response to his tweet, several Twitterati expressed their opinions. One user named Vincent said, “That’s why decentralized crypto was invented. It self-regulates.”
On the other hand, Cryptorich replied to Schiff saying that. “I agree we are better off without the SEC, Though I was not aware that there was any meaningful regulation in crypto. I think a minimum of regulation is fine, certainly not more over less.”
Surprising too is the support from the EU’s Markets in Crypto Assets (MiCA).
The European Union should hold off on more crypto regulation following the collapse of exchange giant FTX, European Parliament member Stefan Berger said on Twitter. The lead negotiator on the Markets in Crypto Assets (MiCA) file added that regulators should wait until new EU laws about crypto come into force.
“The FTX disaster is the result of missing regulation,” MEP Berger originally tweeted in German, adding: “Governments should not excessively over-regulate now, but follow MiCA. With global MiCA rules, you would have internal control mechanisms, separation of customer assets/funds, proof of good management, white paper.”
The center-right MEP previously told The Block that “MiCA is the bulwark against Lehman Brothers moments such as the FTX case." FTX, previously valued at $32 billion, saw a dramatic downward spiral throughout the month of November. The exchange filed for bankruptcy protection on Nov. 11. The filing cited a “complete failure of corporate controls."
And despite the long-term cascade effect of the FTX crash on crypto, the industry’s spirit is strong, Cointelegraph reports from Istanbul Blockchain Week.