FTX's collapse underlines the need to regulate crypto

never let a good crisis spread unused. The cryptosphere seems to have hit an almost existential catastrophe: FTX, a large stock exchange that had an evaluation of $ 32 billion in January, collapsed with an 8 billion dollar hole. The founder of FTX, Sam Bankman-Fried-previously the friendly face of Crypto-is caught up in accusations that his company has laid or abused customer funds. The trust in the broader cryptomarkt - its trading stocks - was hit hard because Bitcoin lost value. It is now time that politicians, political decision -makers and supervisory authorities take protective measures.

The largely unregulated status of crypto has an attractive simplicity: do not invest unless you are ready to lose your shirt. It is a message that is easy to understand for stock market speculators. Whether you will follow the council is another question given the siren call of simple profits that promise supermodels and sports stars in prime time advertising. The current approach has probably contributed to delimiting the crypto crisis from the rest of the financial system.

To improve the status quo, there must be no half things. A flood of investment scandals in retail has shown that the regulation only gives the shine of seriousness without the advantages of parts of the business of a company. It is confusing for normal customers who see that a company can have certain permits and incorrectly assume that their investments are secure if something goes wrong. Crypto investors should not be saved if bets go wrong to an asset without internal value. Existing criminal laws can be applied to cases of fraud and theft. But there are simple improvements that could and should be made to protect consumers and the entire financial system from the risk of crypto.

The parts of the crypto ecosystem that touch the real world should have the most effective guardrails. This means that both stable coins, which are allegedly underpinned by real assets, should be brought to the supervisory authorities as a way for dealers to park their money safely between bets, as well as stock exchanges such as FTX. Stable coins should at least have to publish tested reserves to show that their claims are true.

A similar transparency should be imposed on the stock exchanges. The boss of Binance, the arch -rival of FTX and once controversial savior, said that the stock exchanges should now publish their proof of reserve. But that is of little use without disclosing the other side of the main register. So far, Binance has refused to publish its liabilities.

In addition to his stock exchange services, FTX was busy awarding loans, spending and conveying tokens. The regulation of crypto exchanges should stop intertwined functions that can lead to conflicts of interest and "hyper-correlated" risks, as Bankman-Fried described it. The regulation should also prescribe the separation of customer assets in order to prevent the type of lending with other people's money that FTX has granted his sister hedge fund.

The United States, the United Kingdom and the EU have draft laws to try to close some of the gaps. But the political standstill and territory struggles have stopped progress, certainly in the USA. The weight of the US markets and the long arm of their economic laws make it imperative that the dynamics are not lost.

It will be difficult to impose rules on an industry, which has deliberately settled out of principle on principle and sometimes for Refrusting reasons. Smaller jurisdictions with loose regimes have offered a safe port that did it in other financial areas. This is undoubtedly problematic. But without steps of the largest and most powerful jurisdiction, arbitrage, charlatans and blunt fraudsters will continue to increase. Waiting for the next, more consequent crisis before you act, can be too late.