On the 11th of November 2022, Jack Chervinsky, the head of policy for the blockchain association who previously submitted an amicus brief with regards to the Ripple Vs SEC case, has yet again spoken up with regard to FTX’s situation.
FTX's failure doesn't justify a rush to regulate in the US.
FTX is a non-US exchange based in the Bahamas. By design, it didn't have any US customers so that it wouldn't be subject to US jurisdiction.
There is no law Congress can pass to prevent the failure of an offshore firm.
— Jake Chervinsky (@jchervinsky) November 11, 2022
Seeing the mess FTX is in, and the effect on the US citizens, it’s natural for regulators to want to step in and do something, not only to limit the collateral damage but also to ensure that such a thing doesn’t occur again. According to Jack, that though wouldn’t be a wise course of action.
The tweet brings some legal facts to light. First the difference between FTX (the parent company) and FTXUS. Secondly the resulting effect of heavy regulations on both the US-based exchange companies and their users.
FTX is not a US-based crypto exchange. It’s based in the Sovereign island of Bahamas within the Lucayan archipelago of the West Indies. Since FTX is not US regulated, it’s not under US jurisdiction, so technically it has no US users. Being an offshore company, it passes beyond congress’s ability to regulate, or mitigate operational failures.
And the US-based child company, FTXUS is solvent, untouched by the liquidity crunch FTX is experiencing.
Added to that, he commended the efforts of US-based companies, saying that whatever regulations that are levied to control a foreign company outside their shores, would also adversely affect their national exchange establishment. With increased regulation there is a possibility that certain services like yield farming, and leveraged prep swap will be unavailable for US users, driving them back into the arms of unregulated foreign establishments.
Obviously, the situation with FTX opens our eyes to the potential dangers of the crypto space being unregulated and should be addressed after the situation has been resolved, preferably in 2023. Yet not everyone agrees with Jack’s point of view.
A rush? How many BILLIONS in failed coins and hacks do you need before you “act”. A trillion worth?!? Lol. Measured regulation is needed.
— Feeney Factor (@TheFeeneyFactor) November 11, 2022
A Twitter user brought to mind the billions lost to failed projects and hacks and some believe that measured regulation is actually needed.