More failures ‘to follow’ FTX meltdown

TOKYO: The meltdown of Sam Bankmanfried’s digital asset empire FTX is a “Lehman Shock” to the industry, potentially causing more crypto firms to fail, says the chief executive officer and co-founder of major Japanese crypto exchange bitFlyer Inc.

“It’s a huge impact,” Yuzo Kano said in an interview with Shery Ahn and Haidi Stroud-watts on Bloomberg Television at the New Economy Forum, adding that the turmoil may push other firms into bankruptcy.

“It may actually continue a little bit,” he said.

The fall of Bahamas-based FTX, once perceived as among the most dependable names in the sector, has sparked fresh concerns over the loosely regulated nature of crypto companies and what guardrails are in place to safely oversee clients’ assets.

The exchange’s implosion has drawn comparisons with the fall of investment bank Lehman Brothers Holdings Inc in 2008 or that of energy trader Enron Corp in 2001.

“I think regulation is very important,” Kano said, highlighting how Japan protects consumers through a “double-layer” of oversight by the Financial Services Agency, the market regulator, and an industry group made up of crypto exchanges.

“The rest of the world may follow” Japan in strengthening their rules over digital currencies, such as requiring exchanges to manage their clients’ assets separately from their own, he said.

Kano said bitFlyer has had no dealings with FTX, so there is “no impact at all” on the Japanese firm.