AILSA CHANG, HOST:
The collapse of one of the world’s largest cryptocurrency exchanges called FTX has been described as truly stunning, an implosion, a meltdown. And the whole thing’s calling into question the stability of crypto in general at a time when bitcoin is floundering. And the lack of regulation means there is no backstop, no one to step in for the millions of investors when platforms go belly up. We wanted to try to figure out what happens now. So we called up Laura Shin. She hosts the crypto podcast “Unchained.” Hey, Laura.
LAURA SHIN: Hi. Thanks for having me.
CHANG: Hi. So, you know, FTX’s founder is obviously no longer the company’s CEO. Now John Ray is in charge. And he’s someone with a lot of experience – right? – coming in the middle of chaos like this. He was the guy who was brought in after Enron collapsed, isn’t that right?
SHIN: Yeah. And, you know, that makes a lot of sense because this is, I think, going to be a very messy bankruptcy. There’s about 130 different entities that filed for bankruptcy along with FTX.
CHANG: Well, investors are now calling this moment a crypto winter, an extended downturn. And I’m curious, do you think that there’s any indication it could lead to more than that, more than some extended downturn?
SHIN: It’s highly likely that this will have knock-on effects, that there will be contagion because FTX has a lot of kind of larger entities within crypto that had their money stuck on the exchange. One of the lenders said that about $170 million of theirs was trapped on the exchange. There was one of the hedge funds or venture funds that was close to the FTX group, and they said it was 25 million. There was another one that just came out today. Again, so there are a number of different crypto entities that basically trusted FTX because it was seen as one of the exchanges that was more buttoned up than kind of traditional crypto exchanges have been, that have more of that Wild West reputation. And so that’s why it was such a big shocker and, frankly, why the reaction from the crypto community has been so intense.
CHANG: You mention aspects of crypto had sort of this Wild West reputation. I mean, yeah, the crypto world exists outside of regulation, which for some is exactly part of the appeal. But let me ask you – with so much volatility, could this moment right now be a moment when federal regulators will decide to get involved finally? What do you think?
SHIN: For sure they will definitely want to pursue enforcement actions here. That’s very clear. When you have something of this magnitude that happens – and especially because Sam Bankman-Fried was…
CHANG: Sam Bankman-Fried being the former CEO of FTX.
SHIN: Right. He was essentially the crypto CEO who was kind of closest to a lot of the lawmakers and regulators. It’s a little bit of a black eye for them in the sense that the person who was kind of courting favor with them most is also now the person who, you know, appears to have been perpetrating a sort of Theranos-level fraud.
CHANG: Well, there are some people in crypto – right? – like some investors, some owners of exchanges – who actually would welcome regulation in this world. Can you talk about that piece?
SHIN: Over the past few years, we have seen a number of bipartisan bills that are focused on crypto that have been introduced. Not many of them actually have gotten very far until this fall. And in an ironic twist, the bill that had kind of the greatest chance of being passed relatively soon is one that Sam Bankman-Fried himself was pushing. And so obviously now, this has really caused that, you know, bill’s passage to come into question. So who knows exactly what will happen at this point, but I do think that potentially some lawmakers might come away with the lesson that regulatory clarity is necessary and that new laws are necessary. You know, whether or not they’re going to be able to convince others is – you know, remains to be seen.
CHANG: That is Laura Shin, host of the “Unchained” podcast. Thank you so much for joining us today.
SHIN: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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