Chervinsky Feels FTX’s Loss Cannot Justify Regulations in US

Jake Chervinsky, a lawyer and the head of policy at the Blockchain Association, believes that the failure of FTX doesn’t warrant hasty regulations in the US. The Bahamas-based FTX firm is a non-US exchange.

FTX’s failure doesn’t justify a rush to regulate in the US.

FTX is a non-US exchange based in the Bahamas. By design, it didn’t have any US customers so that it wouldn’t be subject to US jurisdiction.

There is no law Congress can pass to prevent the failure of an offshore firm.

— Jake Chervinsky (@jchervinsky) November 11, 2022

Moreover, Chervinsky thinks FTX had no US consumers so it should not be subject to the local law. He goes on to say that Congress cannot pass legislation to stop an overseas company from failing.

Chervinsky shared his doubts fearing that these facts are unknown in Washington. He emphasized that SBF’s lobbying operations were handled by FTX.US, a brand-new US corporation that engaged his DC policy professionals and has remained solvent.

I don’t think these facts are well understood in DC. SBF undertook his lobbying efforts under the banner of FTXUS, an entirely separate US firm that employed his DC policy team and (so far) remains solvent. I doubt he spent much time explaining the difference to policymakers.

Chervinsky stated that after witnessing the damage by FTX, US policymakers are compelled to assist and prevent this from recurring. However to Chervinsky, applying regulations would be counterproductive. This move will push more investment and public activity toward unregulated offshore markets just like FTX.

On the other hand, some Twitterati responded back to Chervinsky with opposing opinions. For instance, a crypto enthusiast named Alexander Doria said, “To take an extreme example, Russian firms are not located in the US. Yet they are certainly ‘regulated’ with the sanctions in place, to the point that nearly no one would invest there.”

Whereas another Twitter handle by the name ‘TradeDog’ retweeted Chervinsky, saying that the Bahamas securities regulator has frozen FTX assets. As per the statement given by The Bahamas Securities Commission, FTX’s assets could not be moved without the approval of a Supreme Court-appointed liquidator.

In conclusion, Chervinsky shared that US corporations are showing great resilience. He also said FTX emphasized the importance of new rules for custodial platforms, realizing that it will be a time-consuming process. Chervinsky ends by proposing waiting till the dust settles before proceeding further in 2023.

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