FTX Collapse Will Spark Global Cryptocurrency Regulation, Says Bitso

The collapse of FTX, the Bahamas-based cryptocurrency exchange, will cause increased regulation for the global digital asset market, Bitso’s director of regulatory and corporate affairs Felipe Vallejo said in an interview.

“FTX was one of the top three major exchange players in the world and (their bankruptcy) had a reputational impact on the industry that is not good for anyone any time soon. Based on what happened, we believe that many regulators are taking regulation of the sector much more seriously,” he said.

The cryptocurrency firm founded by Sam Bankman-Fried has filed for bankruptcy after users withdrew $6 billion on the platform in three days and maintains around $3.1 billion in debt among its top 50 creditors. Furthermore, Binance, another cryptocurrency exchange, declined in its agreement to bail it out.

“FTX broke the golden rule of the market because user funds cannot be used, unless it is an explicit request,” stressed the Bitso manager who clarified that none of his 6 million users were affected by this case, since they were not exposed to this platform.

“We are an exchange that sometimes sacrifices growth for security and now I believe that security and trust have become more important,” he stressed.

In this sense, Felipe Vallejo said that from Bitso they have insisted since 2015 that regulation is necessary to have clear rules that avoid “bad actors” in the market, for which he emphasized that “2023 will be a year in which He is going to talk a lot about regulatory issues in the world”.

Legislations at the door

Even the director of the first regulated platform to buy, sell and use cryptocurrencies in Mexico recalled that right now regulatory issues are accelerating in countries like the United States, Brazil, Argentina and Europe.

At the end of November, the Brazilian Chamber of Deputies approved the bill to regulate the use of cryptocurrencies as a means of payment for goods and services. It will enter into force in June 2023, local media reported.

In Mexico, said the manager, there is a regulation of virtual assets and the Fintech Law defines what a virtual asset is. The Bank of Mexico published a circular defining how it can be used by financial entities.

“I think that the legislation can be greatly improved, each country has its reality and each regulator sees different risks. In Mexico, this Law was approved in 2018 and many things have happened in the last four years that it would not be a bad idea to review to see what we can improve on tax issues, intellectual property or what happened with FTX”, considered the interviewee.

In the United States there is an executive order to approve a regulation for cryptos and in Europe the Law on the use of virtual assets is about to be approved.

After the fall of FTX, according to the Bitso spokesperson, users ask for proof to confirm that the funds are really still on the exchange platforms.

As a consequence, some platforms went ahead and went to a notary or third party to verify that the resources are really available in the portfolios, however, although they submitted reports on their assets, they did not show their liabilities. Bitso works with other platforms in the world, so that users can verify the existence of their funds.

judith.santiago@eleconomista.mx