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The fall of the FTX cryptocurrency exchange is likely to bring regulatory scrutiny, and Coinbase could be the winner, analysts say. While everyone still understands what some are calling “the Lehman Brothers moment in crypto,” two things are clear: the lack of regulatory oversight has fueled this latest crisis, and more scrutiny is approaching crypto exchanges. “We believe today’s developments have the potential to accelerate regulatory scrutiny of these offshore exchanges both nationally and globally,” Cowen’s analyst team said in a note this week. “We continue to believe that Binance and other offshore companies will play catch-up. as the rules come out. Coinbase, the largest exchange in the US and the first to go public, will benefit from its commitment to compliance, they said. Retail will face several short-term hurdles in the wake of the FTX saga – lower cryptocurrency adoption, low prices, more scrutiny from regulators, potential FTX-related contagion. Analysts say this will hurt Coinbase’s earnings, but the company is well positioned to deal with regulatory changes. “Long term, we expect Coinbase to benefit from a clear lead in compliance,” Cowen said. The company “provides a unique competitive moat and structural advantage over the world’s leading competitors, many of which operate outside the legal framework and lack transparency about their governance and corporate practices,” the firm said in a statement. “We view Coinbase as the most compliant crypto platform worldwide.” This week, this opinion was supported by other Wall Street participants. Christopher Allen of Citi said that while the FTX disaster will have a negative impact on cryptocurrencies and opportunities in the industry, “it could create long-term opportunities for regulated/robust players.” Oppenheimer’s Owen Lau lowered his price target for Coinbase stock due to an expected loss in cryptocurrency adoption and trading volume, but he called it a challenge the company will overcome as it continues to set an example for competitors. “We need more crypto companies using an interoperable and transparent COIN model,” he said in a note this week. “In the long term, the industry will learn the lesson and move forward.” Call for Better Regulation This week, the industry was stunned by the sudden collapse of the now-on-the-border popular exchange FTX and the fall of its leader, Sam Bankman-Freed. His empire quickly unraveled after a report by Coindesk last week showed that most of his trading firm Alameda Research’s balance sheet was in the FTX token (FTT), the native token of the FTX platform. Following this, Binance unloaded its holdings in FTT, resulting in an efficient run on FTX. Binance, which previously planned to acquire FTX, pulled out of the deal on Wednesday. Cryptocurrency leaders, including Coinbase CEO Brian Armstrong, were quick to point out the role played by the lack of regulation in the US. In response to a tweet by Senator Elizabeth Warren, Massachusetts, in which she called on the Securities and Exchange Commission for “more aggressive enforcement” following the news, Armstrong highlighted the lack of regulatory clarity in the US to FTX.com. was an offshore exchange not regulated by the SEC. The problem is that the SEC has failed to clarify the regulation here in the US, so many US investors (and 95% of trading activity) have gone offshore,” he said. “Punishing American companies for this doesn’t make sense.” Ripple CEO Brad Garlinghouse agreed, saying the companies have no guidance on how to comply in the US. [the U.S.] with Singapore, which has a licensing system, systematization of tokens and much more,” he said. “They can properly regulate cryptocurrencies [because] they did the work to define what “good” looks like.
Credit: www.cnbc.com /