ASIC Suspends FTX Financial Services License

FTX beleaguered cryptocurrency exchange saw its Australian subsidiary’s financial services license suspended by the corporate watchdog after the company filed for bankruptcy.

Although the suspension runs until May 2023, the company will still be able to provide limited financial services in connection with the termination of existing derivatives with customers until December 19.

FTX Australia and its subsidiary FTX Express entered voluntary administration last Friday, with Scott Langdon, John Mouawad and Rahul Goyal of KordaMentha Restructuring appointed as voluntary administrators.

Prior to its suspension, the license allowed FTX Australia to “establish a market and provide general advice in relation to derivatives and foreign exchange contracts to retail and wholesale clients”, the Australian Securities and Investments Commission (ASIC) said. ).

The Australian subsidiaries went into administration at the same time as more than 135 FTX Group companies, including, FTX US and cryptocurrency quantitative trading firm Alameda Research, filed for Chapter 11 bankruptcy in the USA.

Concerns about the company’s health began in early November when CoinDesk reported that Alameda’s holdings contained a large amount of FTT tokens, the cryptocurrency created by FTX.

Around November 7 (AEST), FTX found itself in liquidity trouble after massive withdrawals on its FTX International trading platform, which reached US$5 billion by the end of the day, according to the former chief. from FTX, Sam Bankman-Fried.

This happened around the time Binance CEO Changpeng Zhao said the company would seek to liquidate its large holdings of FTT tokens.

Mr. Bankman-Fried first assured clients that the company had sufficient liquidity. However, the day before the bankruptcy filing, he announced on Twitter that the company’s level of liquidity was only 0.8 times the peak daily withdrawal of US$5 billion.

On Monday, Liberal Senator Andrew Bragg claimed that if the crypto laws he drafted had already been legislated, that would have been enough to prevent the collapse of FTX in Australia. The bill has not yet been tabled in the Federal Parliament.

Mr Bragg said the legislation would include requirements for market licensees to hold “a risk-weighted capital base”, as well as protections to separate customer money from company funds in case of bankruptcy of a digital currency exchange or custody service.

Work on custody and license agreements for digital currency exchange and other service providers began at the Treasury under the previous coalition government.

In August, the Federal Treasury began work on “token mapping” to create a consistent taxonomy to inform how crypto assets and related services should be regulated.

A joint statement from Treasurer Jim Chalmers, Financial Services Minister Stephen Jones and Deputy Competition Minister Andrew Leigh said “the previous government dabbled in the regulation of crypto assets, but prematurely jumped straight to options without understand first what was regulated”.

In August, ASIC Chairman Joseph Longo said that although crypto-assets are “very difficult to regulate”, he is confident in the expertise the regulator has developed over the past two years.

Crypto-asset regulation is one of ASIC’s key strategic priorities outlined in its 2022-26 business plan.

Do you know more? Contact James Riley by email.

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