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Home Blockchain

FED: FTX Collapse Didn’t Put the Financial System at Greater Risk

by Darius Ngetich
Jan 5, 2023 - 12:00 am
in Blockchain
Fed: FTX Collapse Didn't Put the Financial System at Greater Risk

The Federal Reserve stated at its most recent policy-setting meeting in December that the collapse of FTX did not constitute a danger to financial markets other than those dealing in cryptocurrencies. The Fed stated in the minutes from its meeting in December that the collateral damage caused by FTX has not affected the larger financial system. 

[DB] Fed Minutes Noted FTX Collapse, "The Collapse Was Not Seen as Posing Broader Market Risks to the Financial System"

— db (@tier10k) January 4, 2023

FTX’s collapse had a significant effect on the markets

The central bank stated that the failure of FTX had a significant impact on the ecosystem for digital assets in the minutes from its 2022 Federal Open Market Committee Meeting, which was made public on Wednesday. Although this crisis had major spillover effects on other crypto lenders and exchanges, the collapse was not thought to threaten the financial system as a whole, according to the minutes.

Central bankers emphasized that inflationary pressures likely imply higher rates would persist for the foreseeable future, referring to FTX as “a renowned crypto-asset exchange” in the minutes. Members of the committee did agree that “substantial” inflation-related progress had been made possible by rate increases.

Central bankers said that the Fed is still dedicated to maintaining price stability and ensuring that any rate move won’t too shock the markets.

Restoring price stability could prove to be harder

According to the minutes, participants pointed out that because financial markets play a significant role in monetary policy, an unwarranted easing in financial conditions, particularly if it is caused by the public’s incorrect perception of the committee’s reaction function, would make the committee’s efforts to restore price stability more difficult.

The Federal Reserve chose to increase interest rates by 50 basis points during its December meeting, snapping a four-meeting string of increases of 75 basis points.

One day after Sam Bankman-Fried, the creator of FTX, came to New York to submit his plea of not guilty, the minute was made public. On January 2, 2023, Bankman-Fried will go on trial for eight counts, including violating campaign finance laws and money laundering. The maximum punishment for the charges is 115 years.

Tags: FTX
Darius Ngetich

Darius Ngetich

Darius Ngetich is a blockchain, crypto, and gaming enthusiast. He is also an animator, VFX Artist, and Game Developer, specializing in computers with vast experience in programs like Blender, Unity, and Unreal Engine. My passions are creating games and informing others about the latest developments in crypto, blockchain, and gaming.

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