FTX collapses a “mini GFC”, but no death knell for crypto

This bull market exuberance that you mentioned, do you think that’s part of the crux of all these meltdowns that we’ve seen this year? Did companies save themselves too much when times were good?

Yeah. I saw with my own eyes what happened in Ireland when people thought the good times would never end. And they did, they came to a screeching halt. And I’m not condemning people for their choices – it’s a normal human thing to be excited about the good times you’re having.

I think what was missing, maybe within the crypto ecosystem, was enough experience and voices saying it won’t always be like this, things are going down as well as up high. I think this reflects the relative youth of the sector. But even then, I don’t think anyone would have expected what happened over the past week.

But I’ve been pushing so hard on the need for regulation, and right now we have an industry that understands the need for protection when it comes to segregation of client assets and proper custodial solutions. We know that’s a good way to go, and last year’s Senate report suggested it.

So we have an industry ready to do that. You have a Senate recommending it. But we’re now in November 2022, a year after that report, and we haven’t really done enough traction.

Is this lack of progress frustrating?

I don’t know if it’s frustration because I understand we’ve had to change governments since then and there’s a lot to understand from a regulatory standpoint.

But instead of trying to regulate products and assets, we should be trying to regulate bad behavior. I think that’s what the industry is 100% behind because what happened with FTX wasn’t a problem with crypto, it was a behavioral problem.

Do you think the collapse of FTX will have a major negative effect on crypto as a whole, especially institutional trust?

No, and the reason I say no with a lot of certainty is that it’s not a problem with bitcoin, it’s a behavioral problem. What I think we’ll see as a result of this is an escalation in regulatory conversations in Australia, the US and the UK. Thus, institutional interest will remain, although it may subside at least until the new year.

I doubt this will be the death knell for crypto that so many outsiders have predicted.

What I hope we see is rather than an amplification around the price of bitcoin, we instead see an amplification of the stories around the use of the technology. I think that’s where the change is going to happen, and I think that’s a critical narrative shift that the industry needs to go through in order to survive.

Does this change the type of crypto assets you might list as an exchange?

Well, we were ready to live with Solana last Friday, and then obviously the wheels fell off of FTX, which was quite closely related to Solana. So we’ve put the launch on hold until the smoke clears and we can see where we are.

We have more launches in the works, and there’s always an appetite for new signups, but it’s safe to say the due diligence will be incredibly thorough.


As someone who worked on the GFC, does this sound a bit like a GFC moment for crypto?

Maybe a mini, in the sense that there are bigger exchanges than FTX, and a huge number of them did the right thing, so it was more of a wake-up call across the arc.

I don’t blame investors who are feeling very depressed this week and anxious about the future. It’s a normal human reaction. But I doubt this will be the death knell for crypto that so many outsiders have predicted.

After the collapse of FTX, many major international exchanges published their reserve proofs and had them audited. Should Australian exchanges follow suit?

Yes, and I think it needs to be on both sides of the ledger, both the asset side and the liability side. It would certainly be useful in the short term to have that degree of transparency, but I don’t know how useful it is in the long term. When I register with a bank, I usually won’t see their balance sheet.

I think when you introduce proper regulation that requires exchanges to provide financial information to the regulator, I think that will meet the long-term needs.

But for us as an exchange, we are actively looking for methods we can use to prove our reservations, and we have several different options. We therefore hope that this will be released as soon as possible so that customers can appreciate that their assets are safe and supported by our platform.

Given the turmoil of the past week, what do you think this will mean for crypto in the months ahead?

I expect, certainly in Australia, that we will continue to push for regulation. We need to have the proper protections here to look after investors in this asset class. And that doesn’t mean regulating it and making people have to go to foreign exchanges to buy crypto. It’s just passing the buck.

We have to do it right here in Australia, to make sure we have those protections in place and also to develop the industry properly.

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