FTX Mayhem failed to scare futures exchanges away from cryptocurrency

FTX Mayhem failed to scare futures exchanges away from cryptocurrency

The CEO of CME Group Inc. Terry Duffy, who has been one of Bankman-Fried’s harshest critics, said he wouldn’t stop trading cryptocurrency futures just because of “one bad factor.”

Although some members of Wall Street’s old guard are having an “I told you so” moment after the collapse of Sam Bankman-Fried’s FTX, futures exchanges aren’t giving up on cryptocurrency.

The CEO of CME Group Inc. Terry Duffy, who has been one of Bankman-Fried’s harshest critics, said he wouldn’t stop trading cryptocurrency futures just because of “one bad factor.” Cboe Global Markets, another Chicago exchange and software provider Trading Technologies, has also recommitted to digital assets in the wake of the FTX crash.

“I’m not ready to say I’m going to delete it,” Duffy, 64, said in an interview this week, as he recalled his feud with Bankman Fried at an industry event in March. “We’ve been on the cutting edge of innovative products, but what we don’t do is do it in a reckless way.”

Futures exchange executives expressed concerns about FTX’s business model before the crash. FTX’s bankruptcy potentially caused billions of dollars in losses to millions of account holders and sparked investigations into allegations of wrongdoing. It also ensnared one of the crypto industry’s largest lenders, Genesis, as well as Gemini, which has halted redemptions, and BlockFi – the lender that FTX had previously bailed out.

“These events reinforce our strategy,” Chris Isaacson, Cboe Digital’s chief operating officer and chairman, said in an interview Friday. “If there was ever a time when confidence in the markets needed to be built and reinforced in digital assets, it is now. This is what we are committed to.”

Parallels 2008

Isaacson said Cboe will continue to trade cryptocurrency futures. Jason Schafer, Executive Vice President of Product Management at Trading Technologies, said that his company will also continue the course, and that customers want to engage in cryptocurrencies in the same way they trade other currencies.

At an event for the Futures Industry Association this week, conference-goers compared the collapse of FTX to energy trader Enron Corp. , which collapsed in 2001 and became a symbol of corporate fraud. Kristi Goldsmith Romero of the CFTC goes so far as to draw parallels with the global financial crisis.

“Opaque, complex, leveraged and unregulated products, a highly interdependent market, concerns about the quality of the underlying assets, and a high potential for contagion risk,” she said. “These are the kinds of things that were there in 2008 that I see parallels with now.”

Bankman-Fried was the driving force behind a failed campaign to hack into traditional finance. He suggested dealing with every step of a crypto-derivatives transaction: liquidating deals and eliminating middlemen who in many cases help spread risk. If approved by the CFTC, the plan could raise risks to the traditional industry and disrupt business models like CME that have been around since the late 1800s.

fierce critics

The plan sparked attacks from Wall Street firms and mounted calls for greater oversight of Bankman-Fried and its competitors. Duffy said the idea was “bullshit from day one”. “I am amazed that so many people were so intrigued by his nonsense.”

Another critic of the plan is ICE founder and CEO Jeff Sprecher. At the FIA ​​event in Chicago on Tuesday, he said, “In general, you can’t have a stock exchange, a market maker, and a settlement organization under one roof.”

Pinkman Fried, 30, has been a major donor to the Democratic Party. He has given nearly $40 million to candidates in the past two years, mostly to Democrats, and has visited lawmakers trying to influence the development of crypto regulations.

Duffy said he hoped politicians who received donations from Pinkman-Fried would bring it back, adding, “I never bought everything.” Sprecher said that politicians who have accepted his money will be quick to show “they’re not affected by it.”

Regulators are investigating whether Bankman-Fried and his associates misused client funds, and the collapse of his firm adds urgency to Washington’s pressure to turn the CFTC into a cryptocurrency watchdog, said agency president Rustin Behnam, in an interview at an FIA event.

return encryption

Ram Vital, chief executive officer of North America at Marex Group, a futures and options brokerage that has a partnership with Coinbase, said that while the industry may take a break for the time being, it will return when confidence is restored.

“What component will be the spark?” Vital asked. “The right regulatory framework that allows everyone to have more of a sense of the word so that some of these FTX-like things don’t happen.”

There could also be opportunities in the future, said Rob Cramer, CEO of Chicago-based trading firm Geneva Trading and chairman of the FIA’s main dealer group.

“It is dangerous to say there is no value in cryptography or the underlying technology because Sam did X, Y or Z,” he said. “Given what happened after Enron, there could be a lot of opportunity for a reputable company with strong governance to pick up parts of FTX.”

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