The collapse of FTX is exactly why crypto needs to move away from “hype cycles” and towards “real utility”

The collapse of FTX, according to Ripple’s APAC Policy Director, was “extremely harmful” for the cryptocurrency ecosystem, but the sector should endure if its attention turns to creating “real utility.”

FTX fall was ‘incredibly damaging,’ crypto must foster real utility: Ripple policy lead

Ripple’s APAC policy lead Rahul Advani said he expects the FTX saga to lead to greater scrutiny on crypto regulations while governments will re-evaluate “their stance towards crypto and blockchain technology,” adding: “The collapse of FTX is incredibly damaging for the crypto space and once again underscores the need for greater regulatory clarity.” Advani argued that the industry will need forward-looking and “flexible” regulations to boost confidence in the crypto sector while protecting consumers. “These regulations must include robust measures for consumer protection but also recognize the different risks posed by business-facing crypto companies. What we don’t want to see is a knee-jerk response that could stifle innovation within the sector,” he added.

Following the demise of FTX, several regulators committed to enhancing crypto regulation. The International Monetary Fund (IMF) recommended stronger regulation in Africa’s crypto marketplaces, which are among the fastest-growing in the world. The Australian government is intensifying its efforts to establish a regulatory framework for cryptocurrencies.

In the meantime, experts have cautioned that cryptocurrency is in the sights of American lawmakers after United States Commodity Futures Trading Commission (CFTC) commissioner Summer Mersinger remarked on Nov. 18 that the moment to act on crypto regulation may have arrived.

Advani cautioned, however, that a “one size fits all” approach to regulation “will not work” because cryptocurrency enterprises have various risk profiles. Instead, he argued for a “risk-based approach” to industry regulation.

The hazards posed by cryptocurrency enterprises, he continued, include requirements for behavior like account separation for business and personal use, the disclosure of conflicts of interest, and the provision of “retail investor safeguards.” “We still firmly believe that crypto is here to stay and that real use cases will withstand the test of time,” Advani said. “I think that the crypto industry will have to take a more focused approach, shifting from hype cycles toward building real utility.”

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