- The collapse of FTX shows that the crypto contagion is not over and the industry has transparency issues, according to EY strategist Paul Brody.
- Brody noted that claims of transparency made by crypto firms are often “difficult to test,” making the industry an “insider’s game.”
- Policymakers have urged the SEC to tighten regulation on crypto firms, criticizing the current hands-off approach.
FTX’s collapse shows that the crypto contagion is not over, and the lack of transparency in the industry means crypto is an “insider game”, according to EY strategist Paul Brody.
“We’re definitely not done with the contagion,” Brody said in an interview with CNBC tuesday. “People have said that crypto is going to be better because it’s going to be transparent and there’s no politically motivated central bank in this ecosystem. crypto is extremely non-transparent.”
This was revealed with the collapse of major crypto firms this year, with companies like moon earth and Sam Bankman-Fried’s FTX declaring bankruptcy, setting off a domino effect of further industry meltdowns.
But the problem is deeper than just bad industry players, Brody said. Users often don’t have the ability to fully review crypto companies on their own, even when companies are transparent with their algorithm. He noted that his own team finds claims of transparency among crypto firms “difficult to test and track.”
“In some cases, it’s absolutely intentional,” he said. “You follow all the rules, but the rules are complicated, and so it’s an insider’s game.”
Brody predicted that customers would start turning to companies in the space they could trust and would be scrutinized by regulators, adding to a chorus of market commentators who have urged government agencies to tighten the screws on crypto companies. Legislators have been criticism of the SEC’s current approachwhich asks crypto companies to “come in and talk” to be regulated.