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Sunday, November 27, 2022
HomeEconomyCryptocurrency exchanges try to calm clients after FTX collapse

Cryptocurrency exchanges try to calm clients after FTX collapse

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Digital asset exchanges are racing to reassure clients that their funds are safe as the collapse of Sam Bankman-Fried’s FTX ripples through the industry.

Binance, the world’s largest cryptocurrency trading platform, as well as smaller rivals including Crypto.com, OKX and Derebit, have pledged to publish evidence that they have sufficient reserves to cover their responsibilities to clients. Coinbase, a US-listed broker, has also sought to distance itself from the crisis that has gripped FTX, the digital asset platform founded by Sam Bankman-Fried.

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The sudden collapse last week of FTX and Alameda Research, a Bankman-Fried brokerage, once seen as industry mainstays, has seriously eroded confidence in the digital asset market. FTX had less than $1 billion in easily salable assets, against $9 billion in liabilities, before it went bankrupt on Friday, the Financial Times reported on Saturday.

Dollar-mirrored stablecoin Tether — the largest in the industry — has faced approximately $3 billion in redemptions over the past four days, according to data provider CoinMarketCap, noting that traders are withdrawing funds from the cryptocurrency market. digital assets.

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Meanwhile, balances in ether, the second-largest cryptocurrency, have dropped 7% over the past two weeks to 22.9 million across major cryptocurrency exchanges, including FTX, as per data from blockchain analytics platform Nansen. At current exchange rates, this points to a drop of close to $2 billion, which suggests that some investors are pulling their coins out of centralized locations in favor of storing them using their own systems.

Binance’s chief executive last week warned of the potential for a “cascading” crisis in the cryptocurrency industry following the failure of FTX, which he said could resemble the 2008 global financial crisis. $32 billion after striking deals with major investors, and was building a public profile through a series of sports sponsorships, such as securing naming rights to the Miami Heat arena.

Coinbase on Friday sent an email to customers, seen by the FT, outlining “how Coinbase’s businesses are different and ultimately better protect” customers’ accounts and assets. The message referenced the company’s financial position and said that the exchange, led by chief executive Brian Armstrong, holds clients’ assets on a one-to-one basis. Coinbase declined to provide comments beyond a blog post made last week.

Trading platforms also tried to distance themselves from what remains of FTX after the group said it was investigating abnormal transactions. Elliptic, a blockchain forensics firm, said on Saturday that there were indications that $477 million worth of crypto assets had been withdrawn from FTX on Friday night.

Cryptocurrency trading platform Kraken froze a handful of accounts owned by FTX Group, its sister trading firm Alameda Research and its executives on Sunday after speaking with law enforcement officials. “These accounts have been frozen to protect their creditors,” the company said on Twitter, adding that other Kraken customers were not affected.

The Bahamas market regulator also said it “has not guided, authorized or suggested to FTX Digital Markets the prioritization of withdrawals for Bahamian customers.” FTX, which is based in the island country, said after halting customer withdrawals last week that it would allow withdrawals of funds from the Bahamas “in accordance with Bahamas-based regulations and regulators”.

Binance, meanwhile, has suspended deposits of FTT, a token issued by FTX to protect users. “We noticed a suspicious movement of large amount of $FTT by token contract deployers,” the exchange said on Sunday (13), and offered suggestions on how to keep digital assets safe.

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