Cryptocurrency companies are being urged to learn from the recent collapse of the FTX platform, as failure to do so could lead to a broader crisis comparable to the Lehman Brothers collapse in 2008, according to the CEO of blockchain platform Chainalysis.
The lack of oversight and transparency remains a significant challenge in the crypto sector, requiring collaboration between crypto companies and regulators to build trust in the industry, said Michael Gronager in an interview with The National.
Gronager emphasized the need for crypto companies to demonstrate corporate maturity in safeguarding people’s assets, including establishing proper governance structures, processes and procedures, control over funds, and comprehensive audits.
The collapse of FTX sent shockwaves throughout the crypto industry, and its former CEO, Sam Bankman-Fried, is currently facing criminal charges. Gronager stressed that transparency and regulation are essential to protect consumers and prevent them from seeking alternatives.
Drawing on the banking industry as an example, Gronager highlighted the importance of oversight and regulation, leveraging centuries of experience in dealing with challenges. While banks have faced their fair share of failures, their regulatory frameworks serve as a precedent for the crypto sector.
In the US, there have been 564 bank failures between 2001 and 2023, with 414 occurring from 2008 to 2011, as per the Federal Deposit Insurance Corporation. Recent failures include Silicon Valley Bank, Silvergate Capital, Signature Bank, and First Republic Bank.
Gronager acknowledged that banks’ institutional and historical knowledge, accumulated over centuries, have enabled them to establish robust regulatory frameworks. Studying the structure of banks could provide valuable insights for the crypto industry and set higher standards for crypto businesses.
Cryptocurrencies and decentralized finance, underpinned by blockchain technology, are generally considered safer methods of conducting transactions, potentially supplanting intermediaries like brokers and banks in the financial system.
The lack of oversight and regulation in the crypto space has resulted in numerous challenges and failures within the industry. To move forward, Gronager emphasized the importance of agreeing on parameters that enhance the reliability of cryptocurrencies and improve the existing controls and processes.
Meanwhile, Chainalysis is expanding its presence in the UAE, with plans to establish an office to tap into the region’s crypto potential. The company recognizes the UAE as one of the global hubs for crypto growth and aims to become a partner in the region’s development. However, no specific timeline was provided for the expansion.
By learning from past failures and implementing robust oversight and regulation, the crypto industry can work towards building trust, protecting consumers, and ensuring long-term stability.
