‘People have legitimate reasons to be concerned’: Crypto industry insiders react to Binance’s plans to acquire FTX

Industry insiders were quick to react on Tuesday following news of a planned deal between two of the world’s largest crypto exchanges – Binance and FTX.

Binance co-founder Changpeng Zhao tweeted that the exchange had signed a letter of intent to fully acquire FTX. The news came after Alameda Research’s balance sheet showed around 40% of the company’s $14.6 billion assets were attributed to FTT, the token that powers FTX, as CoinDesk reported. last week.

FTT was trading at around $14.98 before the announcement of the FTX acquisition. Soon after, it jumped to $19.33. FTT is currently trading at $4.50.

See: Binance plans to buy rival exchange FTX in deal that shakes up the crypto industry

“I fear that the decentralization that we have all fought for is in jeopardy and this is a perfect example of why,” Daniel Keller, co-founder of Flux, a decentralized cloud infrastructure, said in an email to MarketWatch.

“When we place the future of Defi and decentralization in the hands of a few key industry players, we are back to square one with legacy finance. I hope this ongoing game with leverage and high risk of user funds will end soon.

Keller said this is another reason why decentralized finance needs to grow rapidly, adding that in a bear market, many crypto-related projects start to falter and user assets are at risk.

Some wondered if this acquisition meant the crypto was dying out.

Pascal Gauthier, CEO and President of Ledger, a hardware wallet for crypto assets, said crypto won’t go away, but this acquisition highlights an important aspect of security and centralized exchanges.

“People have legitimate reasons to be concerned about the security of their digital assets if one of the world’s largest centralized exchanges gets into financial trouble,” he told MarketWatch. Gauthier further added that there will be more critical digital assets in our future than fewer, “which is why users should take ownership of their encryption keys.”

The combination of FTX and Binance has sparked conversations online about crypto keys, which are like a password made up of a long string of letters and numbers that allow people to access and manage their own crypto. .

Centralized exchanges hold keys on behalf of users, with the promise of security and convenience, but some industry insiders are urging people to take ownership of their own key. The phrase “not your keys, not your crypto” emerged on Twitter to let people know that no crypto exchange is too big to fail. This sentiment was already popular within the decentralized financial community prior to the announcement of the acquisition.

“It is clear that FTX did not enter into this agreement with Binance from a position of strength,” said Ryan Shea, crypto economist at Trakx, a crypto index trading platform. “As an exchange, FTX shouldn’t have much balance sheet risk and should have been able to process customer withdrawals, albeit with some delays due to infrastructure bottlenecks.”

“The speed with which this agreement was reached suggests that the situation at FTX and/or Alameda Research was of a more serious, potentially existential nature. Given this, I strongly suspect that authorities will be keen to analyze what happened and use this latest crypto ‘incident’ as justification to advance the implementation of tougher regulations,” he said. he adds.

“Hardcore crypto-anarchists may find such notions repulsive, but this is likely a necessary condition for wider public adoption of cryptocurrencies, as regulation brings with it the perception of legitimacy. This will also help encourage institutional investors into the sector, as they are used to operating in a regulated environment. »

It’s unclear what this means for the broader crypto industry, but Yesha Yadav, a law professor at Vanderbilt University, believes the acquisition will spark key discussions about how to create better regulation and rules for govern crypto exchanges.

“The power of these conflicts was revealed in the collapse of FTX, with Alameda’s risky balance creating conditions that caused a run on the business and threatened client funds,” Yadav told MarketWatch. “No doubt this event will spark discussions on how to create standards of transparency and robust governance of crypto exchanges to better ensure that these systemic institutions for the crypto industry can operate safely and transparently. ”

FTX did not respond to request for comment and Binance did not immediately respond to request for comment.

Yadav added that “if FTX can fall this way, then it’s a clear red flag that no crypto company is too big and too popular to fail.”

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