White House: Cryptocurrency regulation needed amid FTX’s crisis

FTX, the world’s third largest virtual asset exchange by trading volume on the verge of bankruptcy, is reportedly being investigated by the U.S. financial regulator for misusing customers’ accounts. According to foreign media outlets including Bloomberg on Thursday, the US Justice Department and the Securities and Exchange Commission are closely investigating the suspicion that FTX founder Sam Bankman-Fried illegally borrowed FTT, a cryptocurrency that was minted by FTX, from its customers’ accounts to Alameda Research, founded by himself, to raise the price of FTT intentionally. The government of Bahamas, home to FTX.com, which is independent of FTX US, said it had frozen FTX’s assets there.

“We are closely watching the situation. It is an incident that demonstrates why cryptocurrencies need to be regulated,” White House spokeswoman Karine Jean-Pierre told a press briefing on the day, heralding Washington’s intention to beef up regulation on the entire cryptocurrency market.

Earlier, FTX faced a liquidity crisis after CoinDesk, a cryptocurrency information provider, raised suspicion over the financial soundness of FTX’s affiliate Alameda Research. Bankman-Fried is seeking to mobilize 9.4 billion U.S. dollars, but it remains uncertain whether he will be successful.

Some cryptocurrencies, including Bitcoin, rebounded on the news that U.S. inflation slowed in October, but a sense of crisis is escalating across the cryptocurrency market. BlockFi, a cryptocurrency lender, halted customers’ withdrawals to check risk factors surrounding the FTX crisis. Sequoia, a venture capital, invested in FTX, has written off some of its investment. “Silicon Valley and Wall Street invested 2 billion dollars in FTX, but failed to regulate properly,” the Wall Street Journal said.


Hyoun-Soo Kim kimhs@donga.com