There was an increase in governmental focus on the Cryptocurrency industry in 2022. A huge amount of money was lost when one of the world's major exchanges for digital assets went down. As a result of this, various regulatory bodies have issued statements of worry and caution about the use of Cryptocurrencies. Concerns about the potential dangers of Cryptocurrency operations have been voiced by several US federal officials. Federal Reserve, Federal Deposit Insurance Corporation (FDIC), as well as Office of the Comptroller of the Currency (OFOC), are the regulating bodies. In a statement from January 3, 2023, it was said that several officials from the 3 government regulators had cautioned bankers against vulnerability to virtual currencies. They made the case that the financial system shouldn't be exposed to growing dangers.

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What is FTX Exchange?

The defunct Cryptocurrency exchange and Crypto hedge fund FTX, which is a short form for "Futures Exchange", previously known as FTX Trading Ltd. Established in 2019, by July 2021, the exchange had amassed over a million customers and had become the third-largest Cryptocurrency exchange in the world in terms of trading volume. FTX has its headquarters in the Bahamas and is incorporated in Antigua & Barbuda. The FTX.US exchange is a sister platform that caters only to US citizens. As of the 11th of November, 2022, FTX has been in Chapter 11 bankruptcy proceedings in the United States. A story published by CoinDesk in November 2022 raised eyebrows by claiming that FTX partner company Alameda Research had invested heavily in the company's native currency (FTT).

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Barely 2 months following the crash of Cryptocurrency exchange FTX shocked the financial world, United States authorities cautioned that banks should be extra wary about the dangers of fraud, legal ambiguity, and false disclosures by Crypto businesses. Financial institutions have been asking for greater clarification on Cryptocurrency regulations for months, so this declaration is welcome news.

Cryptocurrency Engagement Risked Regulators

Following the collapse of the FTX virtual currency market in 2022, regulators have issued a warning. It is believed that over $8 billion in consumer monies were lost on the failing platform. As an example of the extreme instability as well as security risks inherent to the Crypto market, US officials pointed to the events that occurred last year. They emphasized the need of appropriately safeguarding the financial system. Therefore, financial institutions will be protected from Crypto-related threats. The authorities have also pointed out the dangers associated with digital assets' use in financial transactions. Deception, forgeries, legislative ambiguity around the custody of digital assets, insecure platforms, vague company claims, infectious Cryptocurrencies, and more all fall under this category. The authorities of the financial industry vowed their complete regulatory attentiveness. As a result, financial institutions will need to exercise more prudence as well as adhere to tougher regulations regarding their virtual vulnerability.

Shock of Crypto Exchange FTX

The shutdown of FTX in November sent shockwaves across the Cryptocurrency sector. It was the gateway for millions of consumers into the digital asset market and the second biggest Cryptocurrency exchange in the globe. Sam Bankman-Fried, the former CEO of FTX, has publicly refuted allegations that he misled shareholders as well as clients.  Claims that he used money from FTX customers to start another company, Alameda Research, acquire real estate, and make political contributions prompted him to enter a not guilty plea in a US court. The whole bitcoin business has been rocked by the guilty pleas of 2 of Mr. Bankman-closest Fried's coworkers, who are now working with investigators. Mr. Bankman-Fried was a prominent player in the business world, recognized for his political connections, celebrity endorsements, as well as successful rescues of rival companies. The United States has accused him of creating a Crypto "safety tower" on a foundation of lies and then misleading shareholders.

FTX Insolvency Raised Doubts

Prior to its collapse, FTX was widely regarded as one of the best Cryptocurrency trading platforms on the planet. Lots of people from all walks of life and all kinds of industries invested in it. Many users and businesses that had investments on the site lost a lot of money when it went bankrupt. These shenanigans elicited comments and worries from people both on and off the internet. The outcome has been stricter controls for internet activity from the US government. Signature Bank and Silvergate are two examples of minor banks included in the bankruptcy case that was found to be vulnerable to the exchange. However, the 2 financial institutions claimed to own a negligible share of the exchange's overall deposits. U.S. authorities claim that the FTX exchange's collapse had less of an effect on the global financial system than was previously believed. The consequence is disastrous, however, for certain people and businesses that had money invested in the site. As a result, US regulators are developing policies to prevent such financial crises in the future.

Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.