PART II: FTX contagion and its aftermath — A paradigm shift towards self-custody and more decentralization within a regulatory framework
We are nearing the end of a painful year that kept investors on edge and left us to ponder what the next year will hold in store. Has inflation finally peaked? Will we be blessed with a stock market comeback in 2023? Finally, just something to cheer us all up and spark hopes?
This week, all eyes were on US key economic data and the Fed reaction that could set the tone for markets in the final days and beyond. There was some initial excitement that the better-than-expected CPI data, signalling efforts to tame inflation, were successful. But Fed J. Powell quickly warned on Wednesday ”The job was far from done.”
Meanwhile, the crypto community is fighting their own battles of twist and turns. Binance founder CZ found himself in the midst of a Twitter FUD plot this week, when customer withdrawals hit roughly $3 Billion, stress testing his exchange, while ex golden crypto boy SBF not only stole investors’ funds but the spotlight once again.
Scheduled to testify in Congress on Tuesday about the $8 Billion hole in FTX, there was a sudden change of plans when he was arrested and charged by Bahamian authorities on Monday with a series of crimes. Allegedly he had built a “house of cards”, where he used customer funds as his “personal piggy bank,” US authorities said on Tuesday.
FTX bankruptcy lawyer John Ray called the exchange’s collapse one of the worst business failures he has seen. A paperless bankruptcy. “They used QuickBooks” he said. “A multi-billion-dollar company used QuickBooks” and adds “I don’t trust a single piece of paper in this organisation.”
While regulators continue to unravel the scope of fraud, malfeasance and negligence at FTX, it must begin to dawn on every bystander that in fact crypto didn’t fail, decentralised finance didn’t fail but people failed, people with a mandate of trust. The disheartening truth is innocent people were harmed by a small group of individuals with no oversight.
“That is the exact problem permissionless technology like crypto solves for the problem of centralisation” Congressman Mr. Emmer said during the hearing and continues “I encourage my colleagues to understand SBFs con for what it is, a failure of centralisation, a failure of business ethics and a crime; it is not a failure of technology.”
“Fortunately,” he underscores “the immutable characteristics of public blockchains, that some people would care not to understand in this committee, allowed the crypto community to reveal Sam Bankman-Fried’s fraud in the on-chain public record, will assist law enforcement moving forward.”
In a nutshell
The damage is done, custodial trust is broken, people are paralysed by recent events and SBF has skilfully managed to exploit the vulnerabilities of the digital asset environment on an unprecedented scale; but every cloud has a silver lining and the popular belief that financial intermediaries were the safer bet may be laid to rest in wake of the FTX crisis, after all.
Trust must be at the heart of the system, that’s what the next article will touch upon. Why decentralised finance, digital identities and self-custody will play a major part of the solution.
Next week
It wasn’t even so long ago, but we will hop back in time to the first days of the internet with old-school dial up modems, the most agonising things for your ears and a very long wait; but it led to a digital revolution, driving the most advanced technologies … to be continued!
Did you miss Part I to this — read it here.
About IAMX
IAMX is a token-based Self-Sovereign Identity and authentication protocol that empowers individuals with the means to own their identity. Adhering to the strictest of regulatory standards for identity protection, IAMX builds on the foundational principles of SSI to provide a robust and secure system where individuals are able to take control and manage their identity. Users of IAMX will realise significant time and cost savings through novel approaches to identity management and ecommerce transactions, like 1-click fulfilment, which are legally binding and maintain local regulatory compliance. With users in control of their identity data, time-consuming processes like Know Your Customer (KYC) or Know Your Business (KYB) become near instant, highly secure transactions.
IAMX builds upon the foundations of Self-Sovereign Identity (SSI), blockchain, and DIDs, enabling individuals, organisations, or any entity to prove their identity independent of external parties or centralised authorities. This way, the authenticity of anything tied to an IAMX DID can be independently confirmed by the entity holding the DID.
IAMX is at the forefront of the Web3 revolution, bringing the world’s most secure, decentralised, and user-friendly Self-Sovereign Identity (SSI) solution to the Internet. Adding the layer of identity and authentication to the Internet, with IAMX you can treat the Internet like you are always logged in. Pursuant to their mission and vision, IAMX is working to solve the problem of providing an identity to the billions of people who do not currently have a state-recognised, legal identity. Using a Biometric Identity Gateway, users with or without state-level identification can create their own identity for use online, one that relies on their unique physical attributes, including their face, iris, and fingerprints.
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