What is the Cause of Chaos Triggered by the FTX Crisis and How Could It Be End?

# There Can't be Two Suns

In Novemebr, FTX went bankrupt five days after the capital liquidity crisis, overshadowing its reputation as the world's second-largest exchange'.

Binance CEO Changpeng Zhao broke down the stronghold of the world's second-largest exchange in just two days after he expressed his intention to sell all of the FTT held by his company.

FTX, which seemed similar to Binance but showed a great presence in the cryptocurrency market with different moves, has achieved significant growth this year. It would have been the best year without Changpeng Zhao's attack.

FTX has been making aggressive investments based on 1000% growth in 2021. FTX CEO Sam Bankman-Fried made aggressive investments despite the collapse of various projects and platforms such as the 'luna Crisis' and the 'Celsius Crisis'.

The cryptocurrency industry even praised Sam Bankman-Fried as a 'solver'. In 2022, FTX's brisk move has raised his status endlessly. As a young businessman, aggressive investment activities was seen by people as the protagonist of the 'success myth'.

However, the 'FTX empire' built by Sam Bankman-Fried collapsed like a sand castle.

Cryptocurrency officials say Sam Bankman-Fried collapsed due to the thorough calculation of Changpeng Zhao, CEO of Binance, the world's No. 1 exchange. This means that Sam Bankman-Fried challenged Changpeng Zhao, who is building his own kingdom around the world, and lost.

# "Issuing Stablein Means an Unacceptable Provocation"

While Binance is challenged by FTX, a decisive event occurs that rubbed Changpeng Zhao's fur the wrong way. Sam Bankman-Fried came up with a plan to issue FTX's own stablecoin. For Changpeng Zhao, who has been working on securing the shares of Binance USD (BUSD) in stablecoin market, FTX's stablecoin would mean a provocation.

At the time, Sam Bankman-Fried said, "If it is an asset issued claiming the same value as the U.S. dollar, the issuer must thoroughly prove the same dollar as the asset issued," adding, "If you hire an auditor who audits stablecoin's reserves and clearly prove the reserves, you should distribute them freely."

It was right after Binance excluded the majority of stablecoin except Tether(USDT). It was Changpeng Zhao who promoted the growth of BUSD despite the market's criticism of 'market monopoly'. For Changpeng Zhao, Sam Bankman-Fried's remarks were a defiance. A week after the announcement of Sam Bankman-Fried's stablecoin plan, Changpeng Zhao expressed his intention to sell all of Binance's FTT supplies, questioning the value of FTT.

FTT is an exchange token designed similarly to BNB(Binance Coin), and is similar in that it incineration is carried out through commission income.

However, while BNB operates a numerous 'dApps' based on Binance Chain (BSC) and has a clear ecosystem, FTT has little practical use other than discounting the exchange. In fact, due to the aggressive growth of FTX, it was only on the rise and recognized for its value.

# Loan

Many cryptocurrency platform companies that invested in FTX received the exchange token 'FTT'. Instead of a question mark on whether the FTT is worth collateral, they received FTT and loaned their assets.

The market began to panic as Sam Bankman-Fried made a very active investment through Alameda Research and presented FTT as a collateral asset in the process. Doubts about who the platforms that will disappear with FTT have collapsed the market frighteningly by receiving a lot of FTT that has lost its value.

The fear that began with the suspicion of the value of the FTT has killed the market even more than its true nature. The hope of the cryptocurrency market, "Is it a rebound now?" was changed to extreme fear in an instant.

# What happened after the 'FTX crisis' of chaos?

The collapse of the FTX exchange is expected to create a more mature investor perspective and market regulation.

The easy collapse of the world's second-largest exchange left investors in shock. FTX, which had been growing with its relentless investment moves, went bankrupt too easily.

The FTX crisis is expected to establish the custom of investors using exchanges that guarantee a Merkle Tree proof certification. Merkle Tree is a block structure that compresses and simply expresses all information, and it is possible to provide a simple and reliable guarantee of exchange data through Merkle Tree proof. In this process, it is expected that the life and death of transparent exchanges will be clearly decided.

Meanwhile, the establishment of regulations on the cryptocurrency market, which has suffered several market crises this year alone, is expected to accelerate further.

Many U.S. politicians, including Cynthia Loomis, who proposed the Responsible Financial Innovation Act, which was the draft of the U.S. cryptocurrency integration regulation, are already insisting on faster regulations. In addition, the U.S. Commodity Trade Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC), regulators of the U.S. cryptocurrency market, also called for faster speed in establishing clear laws and dividing jurisdiction, citing severe investor damage.

The U.S. legislature has gained a clear justification to accelerate the adoption of cryptocurrency integration regulations, referring to 'investor protection' caused by severe damage.

The steps of the U.S. legislature and regulators calling for clear safeguards after the market crisis are expected to accelerate, which could lead to market revitalization. Cryptocurrency, where a clear regulatory plan has been established, falls into the category of the authentic capital market, attracting more capital and can become more massive.

It is expected that the collapse of FTX will be a 'growth pain' that will allow the cryptocurrency market to accelerate its soundness and regulatory framework.

권승원 기자 ksw@