It was reported on November 16 that Gemini had experienced $563 million in customer outflows compared to $78 million in inflows within a 24-hour period. Many have speculated that the FTX collapse contagion isn’t over yet because many exchanges and funds were tied to FTX. It was made clear that prudent regulation in this space is needed. White House press secretary Karine Jean-Pierre also commented that without proper oversight, cryptocurrency could risk harming Americans. These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system.” Some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks-which can include liquidity runs, the rapid collapse of asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering. “Over the last several years, we have seen crypto-asset activity grow rapidly and experience periods of significant stress. The Fed’s news release also made this point about possible regulations: Michael Barr, a top regulatory official from the Fed, warned that oversights could be coming to cryptocurrency shortly. It’s no secret the SEC and even the Fed would like to see stricter controls on cryptocurrency after witnessing how billions of dollars have been wiped out from this space in 2022. There are indications that further sell-offs and liquidity issues could arise. With Genesis and BlockFi pausing withdrawals in the wake of the FTX news, the short-term future doesn’t look promising for other crypto projects.
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