CZ thought the situation was terrible for the industry since it lost a great deal of customer trust.
In 2022, the crypto exchange FTX filed into bankruptcy, following in the footsteps of several other failed ventures, including Terra, Three Arrows Capital, Celsius, and Voyager.
With one of the largest crypto firms collapsing overnight, CZ saw the incident as disastrous for the sector, which destroyed a significant amount of customer trust.
However, CZ maintained his long-held stance that exchange activities, such as business models and evidence of reserves, must be the focus of regulation. Consequently, he anticipated that more regulatory monitoring of crypto business activities was imminent.
While the collapse of FTX is likely to have a short-term effect on retail investors, it represents a wake-up call for conversations about how to manage risks across crypto ecosystems. Specifically addressing FTX, he stated:
“The previous three days have been nothing but a disclosure of issues. The difficulties existed far longer. This issue did not arise in the previous three days.”
The next day, Sam Bankman-Fried, CEO of FTX came out to CZ with a proposition that “did not make sense on several fronts.” Meanwhile, CZ desired an over-the-counter (OTC) agreement for user protection:
“Our original objective was to rescue the users, but when we heard about the misappropriation of user cash and the investigations by U.S. regulatory agencies, we realized we couldn’t touch it anymore.”
CZ thinks that enhancing openness and educating regulatory authorities about crypto audits and cold wallet information would significantly improve the health of the business. It is not required to find the optimal rule balance.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.