News Tech: Following the demise of cryptocurrency exchange FTX, big changes are anticipated in the cryptocurrency market, according to a research released on Thursday by global investment bank JPMorgan.
Panigirtzoglou then went on to enumerate the key adjustments JPMorgan anticipates following the FTX disaster. He firstly wrote:
The collapse of FTX and its sister company Alameda Research “has not only created a cascade of crypto entity collapse and suspension of withdrawals,” according to global strategist Nikolaos Panigirtzoglou, but it is also “likely to increase investor and regulatory pressure on crypto entities to disclose more information about their balance sheets.”
It is anticipated that ongoing regulatory activities will be advanced.
The question of whether to classify cryptocurrencies as securities or commodities is at the centre of a significant debate among U.S. regulators, according to Panigirtzoglou.
Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), has stated that unlike the majority of other crypto tokens, bitcoin is a commodity. To make the Commodity Futures Trading Commission (CFTC) the primary regulator of crypto assets, various proposals have been presented in Congress. JPMorgan predicts that, similar to the old financial system, new regulatory measures will likely arise that focus on the custody and protection of customers’ digital assets.
The strategist stated: “The main beneficiaries post FTX collapse are institutional crypto custodians… Many retail cryptocurrency investors have already shifted to self-custody their cryptocurrencies using hardware wallets… These reputable custodians will probably gain control over the comparatively smaller crypto-native custodians and crypto exchanges over time. The JPMorgan research continues, stating: “New regulatory initiatives are anticipated to develop focusing on unbundling of broker, trading, lending, clearing, and custody activities as in the traditional financial system.”
The most significant effects of this unbundling will be seen by exchanges like FTX that merged all these activities, raising concerns about the protection of consumers’ assets, market manipulation, and conflicts of interest. In addition, the JPMorgan strategist stated that “New regulatory measures are likely to develop focusing on transparency demanding regular reporting and auditing of reserves, assets, and liabilities across significant crypto entities.”
Decentralized exchanges (DEX) were also covered by Panigirtzoglou, who noted that before decentralised finance (defi) becomes widely accepted, they must overcome a number of challenges. Due to slower transaction speeds or the need for trading strategies and order sizes to be traceable on the blockchain, the JPMorgan strategist believed that larger institutions would not typically be able to use DEXs for their larger orders. The investment bank also noted that “Crypto derivative markets would likely see a shift into regulated venues with CME emerging as a winner” was another significant change.