Partner Nicola McKinney comments in WealthBriefing on the FTX collapse prompting a regulatory crypto crackdown

Partner Nicola McKinney discusses demands for greater regulation of the cryptocurrency sector in the wake of the FTX collapse. 

Nicola’s comments were published in WealthBriefing, 18 November 2022, and can be read here.

“News that FTX’s liquidators have pointed to signs of serious fraud at the exchange is a major and potentially concerning development in the FTX saga. If it emerges that FTX defrauded customers on a major scale, or that there were internal failings which failed to prevent external fraud this will no doubt have drastic regulatory consequences for the entire cryptocurrency industry.

The digital assets and decentralised finance industry is already facing calls for regulation from governments and from non-governmental organisations such as the IMF and UN. Should it transpire that FTX committed or failed to prevent fraud, the scope and extent of those failings is likely to take some time to emerge, including the number of potential victims, but it is likely to increase the support for new regulatory regimes to be imposed.

Cryptocurrency is an asset class that has been heavily affected by investment frauds and Ponzi schemes in recent years, however these allegations against FTX are of particular relevance given that the exchange was the third largest in the world at its peak. A clearer picture will no doubt emerge, however the liquidators’ findings pose a serious cause for concern for investors, regulators and the wider cryptocurrency market.”