Crypto CEO warns his industry is facing a 2008-style crisis

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The reeling crypto industry is facing a 2008-style crisis that will lead to a much-needed regulatory crackdown, crypto CEO Changpeng Zhao warned on Friday.

“This is devastating for the industry. The confidence of many consumers has been shaken. We’ve been thrown back a few years,” Zhao, the CEO of cryptocurrency exchange Binance, said during a conference in Indonesia.

The Binance CEO, known as CZ, spoke amid the stunning implosion of rival FTX, which filed for bankruptcy just hours later.

“We just saw another very big player go under,” said Zhao, noting that this collapse follows the demise of Celsius, Voyager, Three Arrows Capital, and other crypto firms.

Zhao was a key figure in FTX’s demise. Binance inked a tentative bailout deal with FTX earlier this week, but that transaction fell apart almost immediately, paving the way for Friday’s bankruptcy filing and the resignation of FTX founder Sam Bankman-Fried.

The moderator noted that the crypto turmoil feels similar to the 2008 global financial crisis that took down Bear Stearns, Lehman Brothers and other top Wall Street players.

“That’s probably an exact analogy,” Zhao said.

He urged regulators to look beyond anti-money laundering and know-your-customer (KYC) rules and instead focus on the operations, business models and reserves of exchanges like FTX.

“Regulators are rightly going to be looking at this industry much, much more closely, which is probably a good thing, to be honest,” Zhao said. “It’s very painful for retail investors in the short term… We feel that pain. But in the longer term, this is another wake-up call to say, ‘Look, we’re in a new industry. There are many risks and we have to learn how to manage those risks.”

Zhao also detailed his interactions with FTX, saying his firm decided to divest its holdings of FTT — an illiquid token backed by FTX — after a CoinDesk report raised questions about the balance sheet of FTX’s sister hedge fund.

“This problem has not arisen in the past three days,” Zhao said, adding that the problems have been there for much longer.

Binance CEO accused FTX of “embezzling” user funds.

Bankman-Fried, the 30-year-old crypto prodigy behind FTX, said Friday he was “really sorry” for what happened at his firm.

“I’m putting all the details together,” Bankman-Fried wrote on Twitter, “but I was shocked to see how things turned out the way they did earlier this week.”


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