FTX Offers a Master Class in Crypto's Flaws
In one sense, investors and regulators should be grateful to Sam Bankman-Fried, the erstwhile head of the FTX cryptocurrency exchange. The spectacular flameout of his virtual empire has evolved from a cautionary tale into a master class on everything that's wrong with crypto markets.
As customers and creditors sort through what remains of the failed exchange's holdings, and as the repercussions spread throughout the crypto realm, here are four lessons that stand out:
Whatever the potential benefits of crypto, the surrounding speculative frenzy has little to do with them. On the contrary, it primarily serves to lure people in and separate them from their money, as FTX has now demonstrated. Proper regulation might help nudge crypto in a more useful direction, and is needed to ensure it doesn't present a threat to the broader financial system. Meanwhile, the message for investors and traditional finance remains simple: Stay away.
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