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The Crypto Industry Struggles for a Way Forward After FTX Collapse

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“For us, this is definitely a fantastic moment,” said Jeremy Allaire, the chief executive of the crypto payments company Circle. “We’re delivering real value, and the individuals who focused on constructing giant speculative trading casinos should not so pleased.”

Binance operates essentially the identical form of business as FTX, but Mr. Zhao, the chief executive, has recently been careful to distinguish himself from Mr. Bankman-Fried, calling his one-time rival a liar and criticizing FTX’s most dangerous practices. On Nov. 25, Binance announced a latest “proof of reserves system,” promising to maintain users informed in regards to the amount of cryptocurrency in its accounts and to dispel fears that it is likely to be vulnerable to the form of run on deposits that destroyed FTX. (But Binance’s plans were heavily criticized for lacking key information.)

Coinbase has also tried to alleviate fears of a collapse, publishing a blog post that said it at all times holds the identical amount of cash that customers deposited. “There can’t be a ‘run on the bank’ at Coinbase,” the post said.

Still, the mere existence of huge firms like Binance, Coinbase and FTX is antithetical to the ideals of crypto, some industry experts argue. Since FTX’s collapse, some crypto enthusiasts have flocked to smaller firms within the experimental field of decentralized finance, which allows traders to borrow, lend and conduct transactions without banks or brokers, relying as a substitute on a publicly viewable system governed by code.

But DeFi has its own problems, including vulnerability to hackers, who’ve drained billions of dollars this 12 months from the experimental projects.

“They’ve based it on clunky technology that could be very inefficient,” said Hilary Allen, a finance expert at American University. “They’re operationally very fragile.”

Scrutiny in Washington has also intensified. Gary Gensler, the chair of the S.E.C., has vowed to pursue crypto firms for violations of securities law. The House Financial Services Committee is scheduled to carry a hearing on Dec. 13 examining FTX’s collapse.

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