雅虎香港財經 Circle CEO: FTX collapse 'doesn’t represent the promise of this technology’
Those advocating for a more equitable financial system suffered a serious setback last week, when revelations emerged that crypto’s so-called white knight, Sam Bankman-Fried, reportedly used customer deposits in FTX (FTT-USD), the crypto exchange he founded, to fund risky bets in Alameda, a sister company he owned.
The bankruptcy of one of the world’s largest crypto exchanges and ensuing allegations around its demise have sent shockwaves across the crypto industry and shaken the confidence in a system built on trust. Rival crypto platforms including BlockFi have halted customer withdrawals while those like Crypto.com have gone to great lengths to assure customers their funds are safe, in part by offering to disclose proof of reserves.
Despite the ensuing fallout, Jeremy Allaire, co-founder and CEO of fintech firm Circle, said the fundamental case for crypto remains intact, largely because of the allegations at play. In an interview with Yahoo Finance Live (video above), Allaire argued that FTX doesn’t represent "what the promise of this technology represents."
Circle hasn’t gone unscathed, in part because of its equity stake in FTX, stemming from a $10.6 million investment in the group during its series B funding round last year. While Allaire described the stake as “tiny,” he took to Twitter last week to declare that Circle has never made loans to FTX or lending platform Alameda, also owned by Sam Bankman Fried.
“What I can say is I think at face value, the numbers that FTX was putting up and the growth that they were demonstrating in FTX's business and their emerging U.S. business were incredibly impressive,” Allaire said. “That was certainly during a time of significant growth in this industry. I think not having visibility into the underlying financial management risk controls, treasury management and other things, certainly has caught everyone by surprise.”
Allaire also highlighted the irony in the fact that many of the biggest financial institutions in the crypto space are operating offshore without regulatory supervision.
“Frankly, most of them focused on creating platforms for speculators and creating platforms that are fundamentally focused on people who are speculating on digital tokens," he said.
'Companies have 0 guidance on how to comply here in the U.S.'
Bitcoin (BTC-USD), the world’s first major cryptocurrency, was launched in the depths of the 2008 financial crisis.
Amid deep skepticism in bankers and regulators, and their ability to police an opaque system, the idea was to create a new system on a decentralized ledger known as blockchain, allowing for more transparency into the system.
Yet, Allaire blamed FTX’s collapse on a lack of a regulation, particularly for offshore crypto companies, who often operate with little transparency and few guardrails.
Responding to a tweet by Senator Elizabeth Warren (D-MA) in the aftermath of FTX’s collapse, Allaire and CEOs of other American crypto exchanges including Coinbase and Ripple argued that a lack of guidance from the Securities and Exchange Commission (SEC) had driven much of U.S. trading activity offshore, adding that U.S. lawmakers bared part of the responsibility for crypto’s most recent collapse.
https://t.co/0HxlRiI6Sy was an offshore exchange not regulated by the SEC.
The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore.
Punishing US companies for this makes no sense.— Brian Armstrong (@brian_armstrong) November 10, 2022
“To protect consumers, we need regulatory guidance for companies that ensures trust and transparency," Ripple CEO Brad Garlinghouse tweeted. "There's a reason why most crypto trading is offshore — companies have 0 guidance on how to comply here in the U.S.,” citing Singapore as an example to follow.
According to Allaire, companies that are "principally operating" out of the U.S. have subject themselves to both state and federal supervision, citing Coinbase and Circle as two examples.
“Whether you're an institution or an individual, whether you're thinking about what exchange to be using, what wallet to be using, or what stablecoin to be using, you're going to be looking for the rigor that goes into being a regulated American financial institution," he said.
In recent days, Allaire has implored lawmakers to act with more urgency in regulating the crypto space in light of FTX’s implosion. In a letter to members of the House Financial Services Committee, he called on lawmakers to pass comprehensive payment stablecoin legislation.
“The consequences of inaction in the United States are significant, imperiling consumers, enabling continued regulatory arbitrage abroad, and stunting America’s voice in harmonizing the use of exponential technologies in financial services and beyond,” he wrote. “The United States is at risk of missing an opportunity to set the rules that will govern the future of payments, money, and other sectors of the global economy.”
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Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita
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