4 months ago 2 min read

With FTX's Collapse, JPMorgan Sees a Bright Side


The FTX collapse, according to JPMorgan, may help to significantly speed up the regulation of cryptocurrencies, a view shared by other market participants.

In a recent study, the investment bank described the circumstances that contributed to the FTX bankruptcy and liquidity problem. Despite being referred to as a "significant short-term setback," JPMorgan stressed that there was a positive aspect to FTX's abrupt and unexpected fall.

JPMorgan thinks regulators will quicken the implementation of comprehensive measures given the publicity surrounding the crash and subsequent disclosures of unparalleled misconduct. It emphasized comparable banking rules that appeared immediately after the 2008 global financial crisis.

JPMorgan continued by saying that this comprehensive reform will then make it easier for financial institutions and the general public to use blockchain technology.

Transparency is emphasized by JPMorgan

The investment bank also highlighted issues that need special attention. More scrutiny and openness, according to JPMorgan, has to be necessary not only at the stablecoin level but also at the exchange level. The extent to which FTX's dubious practices, particularly in how it handled customer assets, had been concealed is one reason why the company's downfall has been so surprising.

Major exchanges, including Binance, sincerely presented evidence that they still held their customers' assets as a result. Many participants shared their cold wallet balances while attempting to use the Merkle tree technique to generate a more thorough proof of reserves.

In its report, JPMorgan acknowledged these initiatives. In terms of rules, it also advocated developing a structure that enables businesses to easily offer this level of transparency.

Even while the crash has emboldened crypto naysayers, JPMorgan is still upbeat about the future of the technology. It registered a trademark for a digital wallet earlier this week. Additionally, it was noted in the research that centralized entities rather than decentralized protocols were to blame for recent crashes.

FTX Collapse Speeds Up Reform

The view that this occurrence will hasten reform is held by many other participants in both the traditional financial and cryptocurrency industries. Following the FTX collapse, the Bank of England recommended increased collaboration in creating a thorough cryptocurrency framework earlier this week.

Deputy Governor Jon Cunliffe added that by doing this, organizations would be able to provide customers with the advantages of blockchain technology.

Michael Saylor, the creator of MicroStrategy and a supporter of Bitcoin, recently made a similar statement. According to Saylor, recent occurrences will "strengthen the hand of regulators" and "accelerate intervention," according to CNBC.

He hoped that regulators would set up a system so that people could register digital securities. The sector would thus be able to "expand considerably more rapidly," according to Saylor, as the market would then concentrate around fewer "registered tokens."

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