The collapse of the US crypto firm FTX has sent shockwaves throughout the global cryptocurrency industry with pressure now intensifying for government regulation of the sector.
The scandal that has enveloped Bahamas-based FTX is now the subject of a court case and probe by the US government looking into the scale of the operation, its management and regulation of the industry.
The company was said to be valued at US$ 32 billion.
A report by the UK’s Guardian newspaper into the legal wranglings surrounding the collapse of the company said “ the court was told FTX’s customers were largely based offshore in the Cayman and Virgin Islands, which accounted for a third of customers between them. The next two biggest customer bases were China and the UK.”
It also said the failed cryptocurrency platform’s 50 biggest customers are owed nearly US$3.1bn after its sudden collapse.
A recent survey by industry publication CoinJournal, placed Cayman second among the top 10 most crypto-tax friendly countries divided into three broad areas – short-term capital gains tax, long-term capital gains tax and income tax.
Meanwhile, it is expected that the FTX collapse and its implications for the wider global financial sector, of which Cayman is a key player, will come up at the meeting of the Caribbean Financial Action Task Force (CFATF) being hosted by the Cayman Islands Government from November 26th to December 1st.
Over 130 local delegates will be participating in the meetings, representing a wide cross-section of competent authorities, representatives from the Anti-Money Laundering Steering Group and the Inter-Agency Coordination Committee.
Cayman is taking over the chairmanship of the CFATF with Attorney General Samuel Bulgin, who currently serves as vice chair, is slated to assume its chairmanship during the plenary, taking over from Bermuda which is the current chair.
“The Cayman Islands Government is well aware of the importance of financial services to its economy and the need to proactively engage in the global fight against money launderers and those who finance terrorism and proliferation,” Mr Bulgin said in advance of the meeting.
The plenary will commence with an opening ceremony, emceed by the Attorney General, Hon. Samuel Bulgin, KC, JP, where His Excellency the Governor, Mr. Martyn Roper, OBE, the Premier, Hon. Wayne Panton and Minister for Financial Services, Hon. André Ebanks will make opening remarks.
THE FTX EFFECT
The fallout from the sudden collapse of FTX, one of the world’s largest cryptocurrency companies, is being assessed to determine the extent of the impact and steps that are likely to bring the high-risk but ballooning industry under regulatory supervision by governments and international agencies.
According to the UK’s Daily Mail newspaper, “the sheer size of FTX’s collapse highlights the massive market risks inherent in the growing crypto industry.” Saying that billions of dollars of wealth may have been destroyed in a few days, it also reported that the circumstances have prompted investigations by the Justice Department and Securities and Exchange Commission.
The UK is among countries, including the US, looking into regulating the sector and launching their own versions of cryptocurrencies as the global market continues to expand despite a series of setbacks.
According to the London-based City AM newspaper which reports on the UK’s finance industry, “Watchdogs in the UK have been edging into the space but currently only regulate crypto firms under anti-money laundering rules.”
The Financial Times has commented that “FTX’s collapse underscores the need for regulating crypto” and argues that “activities that touch the real world should have the most effective guardrails.”
The Bank of England, the UK’s central bank, has warned that the implosion of FTX has underlined the need to rapidly bring crypto within the remit of financial watchdogs before it threatens the stability of the wider financial system.