By
Chimamanda U. Martha
May 8th, 2024
Binance CEO Changpeng Zhao – CZ – has, however, vehemently denied taking part in the FTX collapse, citing that his exchange is a victim of the situation.
Following the sudden collapse of the FTX cryptocurrency exchange and its subsidiaries, Binance, the leading digital asset exchange by daily average traded volume, has been under global regulatory scrutiny. As a centralized exchange, worldwide regulators are keen to understand whether Binance overstepped any antitrust laws during the FTX tenure.
While speaking to reporters, Rep. Patrick McHenry, a senior House Republican, confirmed that Binance’s role in the FTX collapse is under congressional scrutiny.
Binance CEO Changpeng Zhao (CZ) has, however, vehemently denied taking part in the FTX collapse, citing that his exchange is a victim of the situation. Moreover, Binance had an FTT token bag, which the company reportedly did not liquidate on time. Hereby giving Binance’s team a possible breather space in the oncoming December hearing.
Binance has time and again argued that the cause of FTX’s collapse was ‘financial irregularities and possible fraud in written comments to a UK parliamentary committee. Notably, the UK counterparts wanted to know what role Binance played in the FTX collapse.
FTX Collapse Sparks Worldwide Regulatory Scrutiny
While the collapse of a major cryptocurrency exchange is not news in the industry, FTX’s failure has pricked regulators’ comfort worldwide. Moreover, FTX was legally regulated through an operation license in several jurisdictions, including Australia, the United States, and Singapore, among others. As such, millions of people globally have been psychologically affected by the sudden FTX and Alameda’s collapse.
The mystery surrounding Sam Bankman-Fried escalated after $450 million worth of digital assets belonging to FTX customers vanished a few hours before the company filed for chapter 11 bankruptcy.
Consequently, McHenry told reporters that the FTX collapse had expedited the need to regulate centralized exchanges and the digital economy.
“We’ve had these conversations about what I think are the second-, third-, and fourth-order decisions that we have to make as a committee to bring clarity,” McHenry said. “So I believe the first step here is you have to have clarity around what is a digital asset. And that means making a clear legal distinction here.”
Meanwhile, as more regulators focus on digital assets, crypto prices have significantly slumped in the past few weeks. Bitcoin price, for instance, lost approximately $5000 in two days following the FTX collapse. Nearly $100 billion have been wiped out of the digital asset economy in the past few days.
Nonetheless, the long-term bullish sentiment on digital assets has remained among many investors. Elon Musk, Tesla CEO, has reiterated that Bitcoin will survive, but he cautioned that the winter may be longer. Furthermore, the ongoing bear market has shown several characteristics of a struggling economy.