The collapse of Sam Bankman-Fried’s FTX has shattered confidence in the crypto sector and, in some people’s eyes, presented it with an existential problem.
But Chris Tyrer, head of Fidelity’s Digital Assets unit in Europe, sees things differently.
In an interview with Financial News, Tyrer said the crisis could actually be a good thing, and that clients looking to trade crypto were flocking to traditional finance firms offering digital assets services like Fidelity. It comes after a loss of trust in crypto native exchanges like FTX.
Tyrer said the recent chaos had led to “a pretty substantial uptick in client activity and deposits”.
He described the trend as a “flight to quality,” adding that the implosion of one of the world’s largest crypto exchanges “has definitely been a positive for us and the role we play in the industry”.
The executive also insisted that Fidelity – which has positioned itself as the responsible face of an occasionally irresponsible industry – will not suffer any reputational damage from the crash.
Unlike some others in traditional finance, such as BlackRock, VanEck and Seqoia Capital, the firm had “no exposure” to FTX, he told FN.
Tyrer said that while the crypto space had seen “egregious” examples of “poor activity and malfeasance”, it was not a failure of the industry but of “human nature”.
“From our perspective, this is definitely a speed bump for the industry, but I don’t think this is existential,” he added.
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Not everybody agrees with Tyrer. Moody’s warned institutions that they should stay away from the sector a few weeks back.
There is also a growing school of thought that regulators should “let crypto burn”, as two professors of finance — Stephen Cecchetti of the Brandeis International Business School, and Kim Schoenholtz at NYU’s Stern School of Business — wrote in the Financial Times on 17 November.
However, speaking for the first time on the issue since FTX’s demise, the Bank of England’s deputy governor Sir Jon Cunliffe said on 21 November that there was still a need to regulate the industry.
“Whether or not one thinks it is sensible to invest or trade in the highly speculative assets that make up most of the activity in the crypto world, investors should be able to do so in transparent, fair and robust marketplaces, with the protections that they would get in conventional finance,” Sir Jon told a digital assets conference at the Warwick Business School.
Regulators “should not wait until [the crypto world] is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilising impact,” he said.
Nonetheless, he acknowledged there was a chance that crypto’s wild volatility will “ensure the sector cannot grow” in the long term.
The contagion spreads
That view would appear to be coming to fruition, at least in the short term.
Crypto exchange Genesis is teetering on the brink, according to a Wall Street Journal report that says it has approached both Binance and Apollo Global Management for cash, and that Binance has already said no.
In a not-very-reassuring statement, a Genesis spokesperson told the paper: “We have no plans to file bankruptcy imminently.” (We’ve added the emphasis, since it’s doing a lot of heavy lifting…)
Silvergate Capital looks like it could be facing headaches, too…
They probably wont be the last firms to end up in this situation. FTX owes its 50 largest creditors about $3.1bn, and two of them are each owed more than $200m, according to a recent bankruptcy filing.
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Genesis is the jewel in the crown of Digital Assets Group, the crypto empire built by Barry Silbert, which also includes Grayscale and the news outlet CoinDesk. Bloomberg reports on what could be next for the 200-company-strong conglomerate and its secretive owner.
We wouldn’t normally promote our competitors’ products, but the Financial Times is selling a non-fungible token of a giant tombstone bearing the names of the finance giants exposed to FTX. It’s available on OpenSea.
For a man who some have suggested could end up facing jail time for his (large) part in the FTX crisis, Sam Bankman-Fried has been surprisingly media-friendly. Here’s his jaw-dropping interview with Vox from last week, in which he said “f*** regulators”…
…And here’s a more recent interview with CNBC, in which he said he is still trying to persuade investors to prop up FTX and save his empire.
To be clear, the 30-year-old is no longer a part of that empire, after the new chief executive (and Enron administrator) John J Ray III booted him out.
Wonder if SBF got the memo…
To contact the author of this story with feedback or news, email Alex Daniel