Crypto In Crisis

The collapse of FTX, the world's third-largest crypto exchange, has intensified fears of an impending crash of the digital currency, calling for tighter regulations around its trade to protect investors' interests

- M.G. ARUN

At the peak of his dazzling career, Sam Bankman-Fried, popularly called SBF, was worth $26 billion (over A Rs 2 lakh crore). The 30-year-old American entrepreneur, known for his trademark mop of hair and dishevelled looks, had achieved an iconic status in the world of cryptocurrency, becoming its champion in a world ever looking for new ways of wealth creation. He lobbied and donated to prominent government figures, rescued failing crypto projects, and pledged much to charity. The success story looked too big to fail until it eventually did. On November 11, Bankman-Fried's Bahamas-based firm FTX, the world's third-largest cryptocurrency exchange with over a million investors, filed for bankruptcy protection, sending the prices of cryptocurrencies crashing on exchanges worldwide. Overall crypto market capitalisation or the total value of cryptocurrencies traded fell from more than $1 trillion (around Rs 82 lakh crore) on November 6 to $803.6 billion (around Rs 66 lakh crore) on November 21. This was also way off the $3 trillion (around Rs 245 lakh crore) valuation cryptos saw last November when the industry was at its peak. Following his firm's collapse, Bankman-Fried's wealth shrank to nearly $1 billion (around Rs 8,100 crore), even as he faced a series of lawsuits and had to give up his position.

The collapse of FTX has been the biggest so far in a series of recent jolts to the crypto business, adding to the commotion in a sector that has faced brickbats for its absence of regulation or any underlying asset value, making millions of investors susceptible to market vagaries. Coming on the back of a crash in crypto valuations following the Ukraine war that has led to fears of a recession in several parts of the world, the latest event has kicked up more questions about the future of the crypto business.