Op-ed: FTX crash shows cryptocurrency market needs bank-like regulation
Summary
The recent turmoil in the trillion-dollar crypto sector, including FTXs sudden liquidity crisis and spectacular collapse, has updated the concept of a bank run — made famous in movies like "Its a Wonderful Life" and "Mary Poppins." And now, the largely unregulated nonbank FTX, which had multiple crypto business activities spanning the globe, saw $6 billion in withdrawals in 72 hours and has collapsed entirely amid the potential for law enforcement and congressional investigations. More recently, the growth of the trillion-dollar crypto sector — with its many asset types, exchanges and wallets, intersecting with mainstream finance in a number of ways — has created a whole new field of unregulated nonbank players. The critical overriding principle to getting the shadow banking system on safer ground is this: apply the same regulatory standards to the same products and services, regardless of origin or the technology involved. Like the proverbial man searching for his glasses under the streetlight "because thats where the light is," evaluating financial stability shouldnt mean that policymakers should only look for systemic risks in the entities they directly regulate.