Changpeng Zhao (CZ) is the CEO of Binance, the global giant. It is the most reputed digital currency exchange in the world. He attended the G20 Summit held in Bali, Indonesia. Leaders of the G20 Group of Nations were also present. He spoke freely about the cryptocurrency world to them. 

Zhao urged everyone to consider modifying existing regulations and creating newer ones for the world of virtual currencies. Then, it would be possible to avoid disasters like the one that FTX went through in November 2022. Zhao also announced a recovery plan fund. It would go towards helping crypto businesses that were struggling. So, if you are into Bitcoin, you may consider knowing about Bitcoin and Customer Experience

FTX’s Rise to Success

Sam Bankman-Fried became a millionaire at a young age, thanks to the FTX cryptocurrency exchange. He founded the company in 2019. Headquartered in The Bahamas, FTX was among the largest digital currency exchanges by 2022. It was worth $32 billion. The credit for this marvelous success goes to aggressive marketing, political lobbying, a Super Bowl ad campaign, and large-scale donations to worthy causes. 

However, the company collapsed in November 2022. CoinDesk probed into the collapse and discovered some astonishing things. Bankman-Fried owned a quant trading firm, Alameda Research. Its position was worth $5 billion, albeit in FTT tokens, the native currency of FTX. Even the Alameda Treatment Foundation also had its valuation in FTT tokens. 

It resulted in the cryptocurrency world having doubts about FTX’s undisclosed solvency and leverage. 

FTX’s Bankruptcy

Investors’ doubts were confirmed with the activities of the company becoming public knowledge. FTX had gone in for risky trading options. They were not considered legal, especially in the U.S. Sam Bankman-Fried was forced to resign. 

A liquidity crisis came to the fore. Numerous customers began to withdraw their funds. However, not all were able to do so because FTX did not have enough reserves. The fact that the organization filed for bankruptcy soon after only increased the apprehensions of users. 

The global giant, Binance had offered to offload its holdings of FTT tokens. In other words, it had been offering a rescue deal to FTX. However, after investigating the events of FTX’s collapse, Binance withdrew its offer. Thus, an estimated $200 billion disappeared from the cryptocurrency marketplace.

Soon after the bankruptcy application went through, Elliptic discovered that a hacker had entered FTX’s online premises. Unauthorized transactions led to the loss of $500 million in digital assets. 

Elliptic is blockchain analytics, checking cryptocurrency compliance. The hacker utilized on-chain spoofing to drain digital wallets. It was later discovered that this individual had invested all the funds in ETH (Ether).

The Aftermath of FTX’s Collapse

The digital currency industry has been in existence for a decade and more. Yet, it has been struggling to convince ordinary customers, regulators, and investors of its complete trustworthiness. Therefore, FTX’s collapse has only added to the skepticism and fears. 

FTX’s collapse could be attributed to failure around governance and risk management, inappropriate usage of clients’ assets, and excessive leverage. Therefore, the SEC (Securities and Exchange Commission) and the U.S. Justice Department have begun a stringent investigation. The investigation is focused on Alameda Research’s appropriate or inappropriate utilization of customer funds. 

Whatever the case, FTX’s future is extremely uncertain, and difficult to envisage on a positive note. After all, the company has frozen all withdrawals. It also advised against depositing funds. In turn, investors are becoming apprehensive about the stability and security of other cryptocurrency exchanges too. 

Changpeng Zhao’s Recommendations

Changpeng Zhao expressed regret at whatever had been happening in November 2022. As he rightly pointed out, the cryptocurrency industry was still relatively new, and unexpected disasters were occurring. Therefore, the industry had to take more responsibility and formulate appropriate regulations.

It was the cryptocurrency industry’s duty to protect consumers, not only regulators. Several nations regarded digital assets lightly in comparison with other financial sectors. Therefore, consumers had to work out for themselves how they could keep their investments risk-free.. 

He suggested that a Recovery Plan Fund is in place. After all, even strong companies could not immediately find cash, or assets for cash conversion, to cover emergencies. The Recovery Fund would prevent the cascading of negative funds.

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• Source: Plato Data Intelligence: Platodata.ai