The crypto world has been rocked by FTX going bust. This follows on from a long period of the market cooling down, with top global analysts keen to witness the next developments.
Here, we’ll examine the reasons for it and explain just what it means for FX in the UK.
What is FTX?
FTX stands for Futures Exchange and was a centralised cryptocurrency exchange platform built by traders. Owned by former billionaire Sam Bankman-Fried, it supported the trading of some of the most popular crypto currencies.
Founded in 2018, it was formed from many companies and offered a regulated exchange for multiple products and services, including derivatives and leveraged tokens.
Why did FTX collapse?
Essentially, companies that formed FTX were trading using their own shares.
A token (type of cryptocurrency) called FTT was largely responsible. FTX issued it and used it as a share, intending to buy it back using its own profits. However, leaked documents revealed that FTT had been used to make risky loans.
From that point onwards, the organisation of the company deteriorated. Bankman-Fried and his few business partners co-owned at least 100 different companies, leading to a gross neglect of professional conduct and structure.
How will the FTX collapse affect international markets?
Internationally, there are concerns over the future volatility of the wider crypto market – especially with the collapse of FTX. With the new boss condemning its unprecedented failure, confidence is at an all-time low.
To complicate the matter further, the future of crypto regulation is now even more uncertain. Ultimately, one individual was behind FTX, making decentralised finance systems more attractive than those owned privately.
How will crypto affect business in the UK?
Regulators are calling for an efficient response. For some, this means tighter restrictions on private crypto currency ownership.
For corporate leaders, seeking the support of a blockchain lawyer could prove invaluable. Whether you work with international clients trading cryptocurrency or you’re developing your own internal systems, safeguarding your financial security should always be a priority.
What’s the future of cryptocurrency in the UK?
At the moment, the UK falls behind other world leaders when it comes to cryptocurrency exchange and trading. However, government crypto plans intend for the UK to become a global hub for all emerging forms of cryptocurrency technology.
One of the ways in which the UK hopes to improve and refine crypto regulation is to introduce stablecoins. These would be used as a means of legitimate payment, providing opportunities for private issuers and currency providers to invest and operate legally in the UK.
Commenting on the UK’s potential in the financial services sector, Rishi Sunak said:
“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate, and scale up in this country.
“We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term.”
