Who benefits?

The collapse of the crypto platform FTX triggers a crisis of confidence. Regulators and central banks benefit. It is the year of crypto crises: Terra Luna, Celsius and now FTX, the sensational collapse of one of the largest crypto platforms that wiped out billions in stock market value. In addition, there is a huge loss of confidence for the crypto industry in general and blockchain technology as a whole. But this also holds potential for regulatory efforts: The crypto crises have occurred because there is a lack of global regulation of the industry.

Approaches in the U.S. are less stringent than in Europe, for example, says Philipp Sandner, professor and blockchain expert at the Frankfurt School of Finance and Management. The crises are driving regulatory intentions, and all those who have always wanted to crack down harder on the crypto industry will benefit from the current loss of confidence. And with them, the central banks that are critical of cryptocurrencies – after all, they want to push their own central bank digital currencies. All those who advocate more centralism are benefiting from the current crisis of confidence. But this is the opposite of what the inventors of Bitcoin and blockchain technology originally wanted – to make banks and government-owned, centralized institutions obsolete.

Still, this is not the end of cryptocurrency and its blockchain technology, says Philipp Sandner, because he says the technology’s potential is enormous. Far too many efforts are being made to prove otherwise – not least by central banks, which want to digitize stocks and securities on a blockchain, among other things. But for too long, there has been a lot of talk, but practical applications have been a long time coming. Critics say the Bitcoin blockchain was invented 14 years ago. Since then, a lot of money has poured into the industry and many bright minds around the world have been working on the technology. But all this money, all this time and all this talent, the potential of blockchain technology has not yet reached the masses, critics say.

Philipp Sandner sees it differently, saying that not everything is pie-in-the-sky and that especially in countries with inadequate financial infrastructure, the applications could help with money transfers. In our latitudes, there are applications such as the securitization of documents and contracts, the traceability of goods or valuables, and the documentation of events (witness statements) that are slowly finding their way into practice. Besides time, it simply takes the realization that the technology can either achieve savings or generate profits for it to catch on.

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