Japaneses authorities have asked FTX to suspend its operations in the country. California regulators will open up an investigation on the failure of the crypto exchange. Meanwhile, authorities from Bahamas have frozen FTX’s assets.
Over the last few days, high octane drama ensued in the crypto space wiping out over $2 billion in just 24 hours. The digital assets market was rattled after FTX, one of the world’s biggest crypto exchanges, collapsed after a surge in withdrawals. Amid a severe liquidity crunch, FTX approached rival crypto exchange Binance to help the beleaguered company raise emergency funding.
Binance CEO, Changpeng “CZ” Zhao, accepted the bailout of FTX by announcing a non-binding agreement to purchase its facilities for an undisclosed amount. However, only a day after the announcement, Binance backed out of the deal revealing that, “the problems are beyond our control or ability to help.“
Japan Suspends FTX’s Local Subsidiary
Thus, failing to raise funding FTX seems to have opened a “Pandora’s box” attracting severe scrutiny from regulators from various countries. On November 10, the government of Japan ordered the local subsidiary of the failed crypto exchange to suspend some operations. The Financial Services Agency (FSA) of Japan took administrative action against the Japanese unit of FTX citing the company’s severe financial crisis. The JFSA notice stated,
“There have been reports that FTX Trading Limited is facing credit uncertainties. It is necessary to take all possible measures to prevent a situation in which the interests of creditors and investors are harmed by the outflow to affiliated companies of the Company.”
The Kanto Local Finance Bureau under the Ministry of Finance of Japan has also issued a one-month suspension order to FTX citing that the crypto platform “accepted deposits while freezing withdrawals of deposited assets, without giving users adequate explanations.”
California and Bahamas Call for Strict Regulations
On the other hand, the Department of Financial Protection and Innovation (DFPI) in the state of California announced that it will open up an investigation as to the “apparent failure” of the cryptocurrency exchange FTX. The regulatory agency highlighted it will take this oversight responsibility “very seriously” reiterating that entities offering financial services in the state have to comply with local financial laws.
FTX’s Bahama based subsidiary is also in the soup as security regulators in the country froze the exchange’s assets. In a notice, the Securities Commission of The Bahamas wrote,
“The Commission took action to freeze assets of FTX Digital Markets and related parties. The Commission also suspended the registration and applied to the Supreme Court of The Bahamas for theappointment of a provisional liquidator of FTX Digital Markets Ltd. (FDM).”
US Intensifyies Regulatory Supervision
The FTX crisis has riled up regulators in the US to push for stingent crypto regulations. At a Thursday press conference, White House Press Secretary, Karine Jean-Pierre said that without “proper oversight of cryptocurrencies”, the digital asset industry risk harming everyday Americans. She added,
“The most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed.”
Meanwhile, United States senators, Debbie Stabenow and John Boozman are pushing forward to publish the final version of the Digital Commodities Consumer Protection Act 2022 (DCCPA). The bill was also supported by FTX CEO Sam Bankman-Fried. If the DCCPA bill becomes a law, it would enable US market regulator, the Commodity Futures Trading Commission (CFTC) to regulate the crypto industry.
