The FTX crisis seems to have brought about a call of attention to strict regulation for the crypto industry.
The destructive implosion of the Sam Bankman-Fried FTX Derivatives Exchange has caused many including the Australian government to look forward to a year of implementing a strict crypto regulatory framework that will give stability to the industry.
Now the country is showing commitment to designing a more robust regulatory framework for digital assets in its region.
According to a spokesperson for Jim Chalmers, the Australian Treasurer, the Treasury is currently making efforts to develop custodial and exchange regulations that will focus on investor protection. Such regulation will reduce the effect or prevent the losses incurred from the crash of firms like FTX.
Based on a current ‘token-mapping’ consultation process suggested by Liberal Senator Andrew Bragg last year, the Treasury has also decided to open consultations to protect crypto custody arrangements as well as regulate exchanges.
“We are closely monitoring the fallout from the FTX collapse, including further volatility in crypto-asset markets and any spillovers into financial markets more broadly,” the spokesperson stated, “These developments highlight the lack of transparency and consumer protection in the crypto market, which is why our government is taking action to improve the regulatory frameworks while still promoting innovation.”
Is Regulation the Key to Building Trust?
Altogether, 30,000 Australians and 132 companies are victims of the FTX implosion.
Many believe that regulation is the only way to reinstate investors’ trust in the crypto industry especially when it has to do with trading platforms. Digital asset specialist at Piper Alderman Lawyers Michael Bacina had something to say about the part regulation will play in the future of the industry.
“Regulatory certainty is key to rebuilding trust in relation to centralized exchanges, and while law cannot eliminate bad behavior, it can set powerful norms and standards which make that behavior easier to find.”
Danny Talwar, the head of tax at the crypto tax platform Koinly Australia held a similar opinion but had reservations about the effect of the regulation on retail investors.
“Following the FTX fallout highlights the need for sensible regulations within the crypto world, both domestically and across the globe……… [But] the challenge will be ensuring that regulation does as intended to effectively protect consumers without suppressing industry growth,” Talwar noted.
For now, Australian regulators have suspended FTX Australia’s financial service (AFS) license. Cyprus Securities and Exchange Commission (CySEC) also indefinitely withdrew its license from the troubled exchange and has ordered FTX to quit operations in Europe.