From our President
FTX, Digital Assets & the Digital Financial Services Ecosystem
For the past several years, it has seemed as if cryptocurrency (or more broadly, digital assets) would take over the world. Te crash of the algorithmic stablecoin Terra and the ever-present volatility of the crypto market never seemed to take the shine off these ephemeral financial instruments. However, all of that momentum came to a stop with the recent failure of the FTX exchange and its associated fund, Alameda Research.
Te full story of FTX and its founder Sam Bankman- Fried is one that will play out in the courts and the media in the months ahead. It will certainly be a story of fraud and deception, but it also will be a story that clearly showcases how little this technology, and the ecosystem being built in real time around it, is
understood. Te pace at which the types of digital assets and exchanges have been developed has been nothing short of breakneck. It should not be shocking that with innovation moving so quickly in a space as naturally complex as payments and currencies, knowledge and oversight have fallen dramatically behind.
For the banking industry, the most important take away from the FTX collapse is that prudent, well-structured regulation is critical for digital assets to operate effectively within the financial services marketplace. Do not misunderstand me: I do not ask for more regulation on banks. However, the entities becoming engaged in building or managing digital assets are developing networks that extend far
beyond what the U.S. Securities and Exchange Commission or any other regulator is prepared to handle. At last count, FTX had potentially millions of creditors. Tese kinds of events represent a potentially catastrophic threat to our banking system. We know that legislation is being draſted on both sides of the aisle and that soon-to-be House Financial Services Chairman Patrick McHenry, R-N.C., has a bipartisan bill on this topic. I would encourage you to engage with us as we help Congress navigate a path forward.
Tis watershed moment also serves as a stark warning on the central bank digital currency front. Setting aside very serious concerns about the Fed holding consumer deposits, rushing to introduce a Fed-backed digital currency is a fool’s
Jackson Hataway, President Missouri Bankers Association
journey given how nascent the technology is here and abroad.
I fully believe that digital assets have a place in banking. Tere are already banks working with customers to help them navigate their digital asset transactions, and new providers are entering the landscape to encourage more banks do the same. Te innovation in these assets is remarkable and, in time, will likely bring immeasurable benefit to our industry and our customers. However, we must be certain that we are moving forward in a safe and sound manner as these assets are developed.
THE MISSOURI BANKER 5
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