The FTX incident spreads. If something happens to domestic currency traders, the Financial Supervisory Commission may not be able to control it.
The FTX incident spreads. If something happens to domestic currency traders, the Financial Supervisory Commission may not be able to control it.
▲The FTX incident caused a global uproar, and there were also victims in China. At present, the four major domestic virtual currency exchanges have issued statements stating that they will not be affected. (Picture source/Xin Media Database)
The closure of the FTX exchange has triggered a global chain reaction. Entities associated with FTX, including the cryptocurrency investment bank Genesis Global Trading, the Gemini cryptocurrency exchange, and the cryptocurrency lending platform BlockFi, have successively imposed withdrawal restrictions or suspended lending. Some are even preparing for bankruptcy. There are victims reported domestically, and some have formed self-help groups. Many investors are also asking, "Are domestic cryptocurrency exchanges unaffected?"
Due to the fact that many foreign cryptocurrency exchanges engage in what is commonly referred to as "leverage" or offer high fixed deposit interest rates to depositors, or issue funds, they must invest in higher-yielding pools, such as FTX. As a result, exchanges in various countries, including South Korea, have reported adverse effects.
Entities related to FTX, such as lending platforms and exchanges, have successively reported closures.
Major domestic cryptocurrency exchanges, including the MaiCoin Group and Bito, have issued statements stating that they have not been affected. For example, MaiCoin stated, "The current group's exposure balance on FTX.com is approximately USD 260,546.07, which does not have any significant impact on the operation and customer asset security of the group."
BITGIN Exchange CEO Zhang Hanlin mentioned that the typical exchange user stores assets in the exchange until making a profit or loss before withdrawing them. However, BITGIN's business model is not typical of an exchange; it is more like customs helping investors enter and exit countries of virtual currency. Over 90% of investors' assets in BITGIN stay for less than 1 day. "On the day of the incident, we were preparing to adjust the asset level when the FTX event broke out, so BITGIN was not affected."
Regarding the claim of 500,000 victims in Taiwan, there are doubts raised by industry insiders. Looking at the scale of the self-help group, there are at most 160,000 people. As for why there are so many victims in Taiwan this time, Zhang Hanlin personally believes that the FTX founding team, consisting of authentic Americans who graduated from top universities worldwide, combined with sponsoring NBA arenas and advertising during the Super Bowl, efficiently conveyed signals of trust that Taiwanese investors are willing to accept compared to the very efficient communication of trust signals by the largest exchange, FTX.
Will domestic exchanges encounter problems? The four major exchanges all claim to be unaffected.
A cryptocurrency dealer emphasized the decentralized nature of the virtual currency community, stating that exchanges should only make money from transaction fees and should not arbitrarily use users' stored coins for other purposes. However, he expressed skepticism, stating that many large market players and traders claim to be unaffected, but this doesn't necessarily mean they are fine. They could be in the process of transferring assets, similar to Gemini, which was implicated by FTX. Did they not know at the earliest possible time? They might announce bankruptcy and closure only when they can no longer delay.
"At the beginning, we only engaged in mining, and the environment in the cryptocurrency circle was much simpler back then." Xue Weili, the founder of InTogether Technology, who has been involved in virtual currency since the mining machine era, mentioned that the current situation is extensive, but since it is not within the jurisdiction of the Financial Supervisory Commission, the process of seeking compensation for victims and even cross-border litigation will undoubtedly be challenging.
Huang Chuanmin, co-founder of Pioneer Capital, who has been deeply involved in the cryptocurrency industry for 8 years, expressed that despite experiencing many ups and downs, he was "shocked" by the FTX incident. FTX, as the world's second-largest cryptocurrency exchange, was highly popular in Taiwan. Its sudden closure has resulted in many users' funds being frozen, with at least several billion NT dollars trapped. This has had a significant impact on Taiwan's cryptocurrency industry.
If domestic cryptocurrency exchanges encounter issues, can the Financial Supervisory Commission (FSC) intervene?
In response to affected parties, the FSC's statement is clear and straightforward. First, it issued warnings in advance. Second, exchanges that issue products in Taiwan without FSC approval are not within its jurisdiction. Third, as the incident occurred in the United States, the FSC does not have regulatory authority over it.
However, some industry participants are concerned that the FTX incident may lead to a chain reaction. Other exchanges, having transferred funds to FTX one after another, are being affected. Currently, entities like Genesis Global Trading are already preparing for bankruptcy. While Taiwan's currency dealers may not have a direct presence on FTX, the concern is whether their upstream funds, which are stored in FTX, will eventually be affected by the FTX incident. The chain reaction seems to have just begun.
In the event that domestic virtual currency institutions are implicated, causing a run and closures, creating more affected parties, especially among the youth, will the FSC be able to intervene? Does it have the legal basis to intervene? Similar to P2P lending, the answer may be that there is no legal basis.
Tang Feng advocates for Web 3.0, but domestic laws haven't kept up with the pace of 3.0.
A senior executive from a bank stated that the Financial Supervisory Commission (FSC) is unlikely to intervene, unless a clear violation of banking laws and the crime of illegal fundraising is evident. He provided a practical analysis, citing the Supreme Court's 106-Tai-Shang-Zi-2 Criminal Judgment as an example.
Both Xue Weili and Huang Chuanmin independently told Mirror Media that after the FTX incident, the first question that came to mind was the "centralization issue, and finding a balance" in regulatory considerations worldwide.
Xue Weili pointed out a paradoxical situation where Digital Minister Tang Feng introduces the concept of Web 3.0, but many existing Web 3.0 applications in Taiwan, such as NFT transfers, are unregulated and untaxed. He emphasized that it's not that businesses are unwilling to pay taxes; rather, there is no such item, and both parties in the transactions have no legal basis. He suggested that the Taiwan government and private entities could use the FTX incident as an opportunity to sit down and discuss, aiming for a more comprehensive system to reduce societal risks overall.
Original news link: 1118-信傳媒
