Stricter Global Crypto Regulations Reduce Risk of FTX-Style Collapses: Report

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Hongji Feng

Author

Hongji Feng

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Hongji is a crypto and tech reporter. He graduated from Northwestern University’s Medill School of Journalism with a Bachelor’s and a Master’s. He has previously interned at HTX (Huobi Global),…

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Last updated:

October 24, 2024 17:32 EDT

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Tougher global crypto regulations have greatly reduced the risk of another major collapse in the digital asset sector.

According to a new report by Nickel Digital Asset Management, recent regulatory actions have helped stabilize the crypto market, decreasing the likelihood of events similar to the FTX incident.

How Crypto Regulations Reduce Digital Asset Market Risks

The report emphasized that increased regulatory oversight has forced digital asset platforms to adopt more robust risk management practices. This includes stricter compliance protocols and improved transparency measures that protect investors and maintain market integrity.

Nickel’s analysis pointed out that many crypto exchanges have implemented tighter controls to prevent issues such as money laundering and inadequate asset custody, which were seen as contributing factors to past market disruptions like the collapse of FTX.

The report also noted that the introduction of new legal frameworks in several major markets, including the European Union’s Markets in Crypto-Assets (MiCA) regulation, has provided clearer guidelines for operating digital asset businesses.

While the study acknowledged the positive impact of these regulations, it cautioned that challenges remain. Specifically, it highlighted that enforcement consistency across different jurisdictions can vary, which might create gaps in oversight.

“The bad actors’ risk can never be entirely eliminated, but through technical solutions such as off-exchange settlement solutions, the counterparty risk can be significantly mitigated. The industry has achieved major progress in that respect,” said Nikel Digital CEO Anatoly Crachilov.

Prosecutors Push for Leniency for Former FTX Executive Nishad Singh

Prosecutors have asked for leniency in the sentencing of Nishad Singh, a former FTX executive, citing his “exemplary cooperation” in investigating the crypto exchange’s collapse.

Singh’s cooperation provided key details about Sam Bankman-Fried’s misconduct, including mismanagement of FTX’s customer funds and manipulation of financial records. His input was considered crucial to understanding the scope of the fraud.

In February 2023, Singh pleaded guilty to multiple charges, including fraud and conspiracy. His legal team has argued for a lighter sentence, highlighting his remorse and limited role in the broader scheme.