FTX Fiasco And The Need For A Crypto Regulatory Framework

Introduction

The world of crypto has been wracked with one piece of bad news after another ever since the global economic downturn influenced by the Russia-Ukraine war. The newest fiasco which has now led to a near wipeout of the market values of major cryptocurrencies such as bitcoin was the fall of FTX, one of the largest cryptocurrency exchanges which filed for Chapter 11 bankruptcy in November 2022. This followed the collapse in the value of stablecoin Terra Luna thus continuing the perpetuating cycle of digital asset instability. The collapse of FTX was further followed by further industry churnings as multiple virtual asset exchanges were financially exposed to FTX due to FTX's position as an industry leader with exchanges such as Bitfront and BlockFi declaring bankruptcy. These events have the potential to scare off prospective investors and further erode the value of existing stakeholders in the virtual asset world. These incidents also show that crypto