Emerging Markets

State of Play: Crypto Regulations in the Wake of the FTX Collapse

Nov 23, 2022 | By JOSEPH CIOFFI

The course of regulatory reform in the U.S. related to digital assets is likely about to change as a result of the allegations against Sam Bankman-Fried and FTX affiliated entities in bankruptcy.

Prior to FTX’s bankruptcy, and with Bankman’s support, the industry was gaining traction in promoting its own views regarding needed safeguards, including oversight and enforcement by the Commodity Futures Trading Commission (CFTC), rather than the Securities and Exchange Commission (SEC). In the aftermath of FTX, we would expect calls for stricter regulations, which could lean reform in the direction of the SEC and adoption of a framework similar to the European Union’s Markets in Crypto-Assets (MiCA) regulation, and at the state-level, New York’s BitLicense.

Going forward, as individual and institutional customers and investors seek transparency and trust, we would also expect custodians and platforms that have submitted to the supervision of regulators, such as the Office of the Comptroller of the Currency (OCC), or registered with the CFTC to have a competitive advantage and be in the best position to adopt to any additional regulatory requirements implemented.

As we enter a dynamic stage for regulatory developments, below is a brief review of recent and/or significant actions by the White House, Congress, United States financial regulators, states, and regulators abroad to regulate custodians and other service providers engaged in digital asset-related activities.

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Adam Levy, an associate in the Insolvency + Finance Group, contributed to this post.