2 - 4 minute read
The collapse of FTX.US, the cryptocurrency exchange where Brett Harrison was once president, offers valuable lessons on how to prevent the next crypto disaster. In a recent interview with Scott Melker, Harrison identified increased independent oversight as the key takeaway from the FTX collapse.
While the fraud aspect of the exchange’s collapse was terrible and shocking, Harrison noted that criminals will always find a way to perpetrate fraud. Instead, he emphasized the need for proper oversight systems to prevent similar incidents in the future. Harrison suggested that proof-of-reserve or proof-of-solvency protocols could be helpful, as well as having independent agencies looking over centralized entities in the crypto space.
Despite the potential for fraud in centralized entities, Harrison believes that decentralized finance (DeFi) has much promise. DeFi offers a way to provide transparent execution and custody that everyone can see and audit. However, Harrison argues that centralized actors in the crypto space, which hold dollars on behalf of customers and execute orders on their behalf, should be regulated and audited by brokers. He believes this would help regain trust and confidence in the digital assets world.
Harrison also emphasized the importance of creating decentralized products where users have greater control over their own information. He believes that building products and services that are decentralized, where the customer maintains as much control as possible over their own information, can help prevent future crypto disasters.
The Bottom Line
Traders should take note of Harrison’s emphasis on increased independent oversight and the importance of DeFi’s promise. While DeFi offers transparency and auditability, centralized entities should be regulated and audited to prevent fraud. Traders should also consider investing in decentralized products where users have greater control over their own information.
The collapse of FTX.US offers valuable lessons for preventing the next crypto disaster. Increased independent oversight and the promise of DeFi should be considered by traders when making investment decisions. Additionally, investing in decentralized products can help prevent future crypto disasters.
