The shocking collapse of the once-respected cryptocurrency exchange FTX is proof digital assets markets need “very careful regulation,” US Treasury Secretary Janet Yellen said.
“It shows the weaknesses of this entire sector,” Yellen told Bloomberg News on Saturday.
Investors are better protected in developed financial markets, she added.
“In other regulated exchanges, you would have segregation of customer assets,” she said. “The notion you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments — that wouldn’t be something that’s allowed.”
At least $1 billion of customer funds — and possibly as much as $2 billion — have gone missing in the implosion of FTX.
FTX’s flamboyant founder, Sam Bankman-Fried, known in the industry as “SBF,” secretly funneled $10 billion of customer funds into his trading company, Alameda Research, according to reports.
The company filed for bankruptcy Friday and its remaining accounts are frozen.