US Treasury Secretary Janet Yellen believes the FTX collapse shows weakness in the crypto industry and a need for regulation.
The unpredictable collapse of the FTX crypto exchange continues to cause a domino effect in the crypto industry and has also caught the attention of various global regulatory agencies, including the US Treasury Department headed by Secretary Janet Yellen.
In a recent commentary on the FTX imposition during an interview with Bloomberg news, US Treasury Secretary Yellen stated that the incident was a clear indicator that the industry required ‘very careful regulation.’ She added that the event also showed ‘the weakness of the entire sector.’
Customer Assets Should Be Separated — US Treasury Secretary Yellen
In particular, she highlighted the lack of separation between customer assets and that of the FTX crypto exchange. Secretary Yellen stressed the importance of clear guidelines to prevent crypto exchanges from using customer funds no matter the situation.
She explained, ‘In other regulated exchanges, you would have segregation of customer assets. The notion you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments — that wouldn’t be something that’s allowed.’
The Damage Could Have Been Worse if Crypto Were More Integrated with Traditional Finance
Furthermore, US Treasury Secretary Yellen pointed out that the losses due to FTX’s collapse could have been amplified had crypto been more integrated with traditional finance.
She added, ‘At least it’s not deeply integrated with our banking sector and, at this point, doesn’t pose broader threats to financial stability.’
Binance Plans to Push for Global Crypto Standards — CZ
Concerning a way forward for the crypto industry, CZ has stated that Binance plans to kickstart efforts toward global standards for the crypto industry alongside other industry players.
CZ made the comments at the ongoing G20 conference in Bali and stressed the importance of transparency following the FTX incident. Crypto asset service providers needed to lead the charge working with regulators to strengthen the industry.
‘As an industry, we need to increase transparency. We need to work very closely with regulators all around the world to make this industry more robust. There is a strong role for regulators to play but we can’t blame this on any single party,’ he said.
（By John P. Njui）