The co-creator of Ethereum (ETH) rival Cardano (ADA) is warning investors that there will be more fallout from crypto exchange FTX’s recent collapse.
In a new video update, Charles Hoskinson says that the disintegration of FTX may push lawmakers to bring about new regulations for the digital assets industry.
Hoskinson says that FTX was not a failure of crypto itself, but of flawed and centralized infrastructure around it.
“Crypto didn’t fail. People failed. People in positions of trust. At the end of the day, as much as we like to believe in the principles of cryptocurrency, this had everything to do with people putting their money in centralized exchanges and organizations entrusting centralized businesses to do something on their behalf.
That’s the very industry we’re trying to get rid of with the cryptocurrency space. Unfortunately, it’s going to now be conflated and there’s a very high possibility that the fallout of this will be new legislation, hopefully decent legislation, but there’s a strong possibility that it won’t be.”
Hoskinson says the damage FTX caused will cascade down, greatly affecting other crypto firms. He says the fallout could ulimately lead to American crypto companies having to follow stringent new regulations.
“This is unfortunately the consequence when you have people who don’t know what they’re doing get into positions of power and trust and create cascading and catastrophic damage. This is just the tip of the iceberg. If you look at the financial relationships that FTX had, as we go down the list, it could create a cascade of insolvencies and unfortunately crypto doesn’t get a bailout, but our competitors do…
We don’t get [bailouts]. We just get the privilege of cleaning up the mess and then being blamed for it and having to deal with the financial outcome ourselves. Now, I do believe this is not going to kill cryptocurrency. I do believe that our industry will be much stronger in the future, and I do believe that our best days are still ahead of us…
[FTX] could end up being the straw that breaks the camel’s back, and changes, at least in the short to mid term, how cryptocurrencies work in America. In particular, it changes the appetite lawmakers have for giving the industry a pro-growth freedom mandate.
We could look at a world where non-custodial wallets are no longer permitted in the United States. We could look at a world where every cryptocurrency except for Bitcoin is labeled as a security and forced to comply with onerous regulations which will rob them of liquidity.”
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