By now, you’ve probably heard or read all about this FTX drama.
Even if it’s only tangentially, the mainstream media outcry over the bust of this crypto exchange has been deafening. So much so that it has been hard to keep up with all the developments if you’ve been following it.
Long-time crypto pundits won’t be all that shocked by this, though. They will remember a similar situation when Mt Gox was hacked back in 2014. At the time, it was a huge disaster for crypto adoption by new and old participants alike.
The only difference with FTX today is that it attracts far more attention because now the amounts of money being lost are too big to ignore. Crypto has earned attention by becoming as big as it is — even with the huge decline over the past year or so.
But today, I don’t want to talk about FTX specifically. There’s too much to unpack there to cover in one article. All you really need to know is that it is a prime example of why any crypto believer, investor, speculator — whatever you want to call it — can’t afford to keep crypto on an exchange.
As the old crypto mantra goes: ‘Not your keys, not your coins’.
Stamping out the competition
What I do want to talk about today is Terry Duffy and his most recent gaff.
See, Duffy is the CEO of CME Group, the world’s largest derivatives exchange that offers trades on almost anything, including crypto. However, Duffy is now more renowned for being an outspoken critic of FTX.
He dubbed the now-defunct crypto exchange and its CEO, Sam Bankman-Fried, a fraud months ago. At least, that’s what he claims.
What has been fascinating about Duffy’s rhetoric around this fiasco, though, is how hard he is going after the regulators. By claiming he knew about this problem at FTX months ago, he has been implicating the SEC for failing in their duty to protect investors.
In particular, he seems to have a real disdain for SEC Chair Gary Gensler. This is interesting as Gensler is known to be quite knowledgeable and supportive of crypto, at least as supportive as a regulator can likely be…
Anyway, here is what Duffy had to say about regulators during a recent TV interview when asked ‘Where was Gary Gensler?’ (emphasis added):
‘I don’t know where Gary Gensler was, but my regulator at the CFTC, I bribed…I asked them, “Why in the world are you invoking the Commodity Exchange Act?”’
Now maybe he misspoke, maybe he was trying to articulate that FTX had somehow bribed the regulators, or maybe he simply had bribery on his mind…
But it is the fact that he uttered the sentence with such familiarity — ‘my regulator’ — that seems so damning. Not to mention the fact that he didn’t address or even try to walk back the slip-up. He just kept on going with his browbeating remarks.
All I’ll say is that, to me, it proves exactly why we still need decentralisation. Because not only will it prevent more crises like that of FTX, but it will hopefully get the grubby hands of people like Duffy out of the mix too.
Stronger and better for it
The irony, of course, which many will overlook at this moment, is that these events always make crypto stronger. It always serves as an important reminder as to why the central ethos of Bitcoin [BTC] — the original crypto — is providing power to the individual.
Our resident crypto guru, Ryan Dinse, told his subscribers yesterday:
‘As I’ve pointed out a lot recently, it’s not bitcoin or proper decentralised protocols that have failed.
‘It’s centralised counterparties.
‘The very thing the real crypto revolution is fighting back against.
‘Centralised platforms were also the one thing regulators could’ve paid closer attention to.
‘Instead, crypto is self-regulating right now.
‘It’s brutal, swift, and there are no bailouts.
‘And while I feel for anyone caught out in this, it seems the lessons about custodial risks need to be relearned repeatedly in crypto.
‘The silver lining?
‘A stronger, more resilient system will emerge. And it’ll happen a lot faster than it does in the current financial system.
‘In the fiat world, frauds like this go undetected for years.’
People like Duffy, Bankman-Fried, and even Gensler likely still don’t get this. Nor do a lot of people jumping on the ‘crypto is dead’ bandwagon at the moment.
But that’s fine because it doesn’t matter what they think.
What matters is that the protocol, the blockchain, is still unbreakable. And that is why crypto will be stronger and better in the long run.
In fact, we all will be when the decentralised future finally arrives.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
