FTX Founder: «Institutions Are Dancing Around Crypto»

While a number of traditional financial institutions are «dancing around crypto», few have made serious moves in the space but FTX founder Sam Bankman-Fried believes there is currently a real opening for industry incumbents to become leaders in the digital asset class.

In light of ongoing momentum in crypto adoption and growing willingness from regulators to explore potential frameworks to govern the digital asset class, there are opportunities in the space not only for newly emerging fintech firms but also traditional players in finance. Nonetheless, most incumbent giants in the sector remain relatively stationary. 

«My sense is that a lot of institutions right now are sort of dancing around crypto,» said FTX founder and chief executive Sam Bankman-Fried in a panel at this week’s Asian Financial Forum 2022. «I think there’s a real opening for a highly regulated, traditional stakeholder and institution to jump into crypto and actually play a leading role. I think very few are taking the first step and I think there are absolutely massive wins from doing so.»

Crypto Regulations 

One commonly cited hurdle to driving more institutional adoption in cryptocurrencies is regulations and Bankman-Fried shared some of his hopes for future developments.  

In addition to creating a «unified framework for crypto» – rather than a myriad of frameworks for various subsets such futures and spots on stablecoins, tokenized assets and other digital assets – he also underlined the need for greater focus on investor needs when establishing disclosure requirements.  

«What you probably want is a framework that tries to address the important things about cryptocurrencies from a disclosure perspective […] rather than arguing about whether or not it’s a security,» Bankman-Fried explained, highlighting areas such as fraud prevention and accurate representation of supply.

«Some of these have some security-like properties [but] let’s try to come up with the disclosures which are important for investors to be able to make informed decisions.»

Institutional Crypto Outlook

Nonetheless, Bankman-Fried expects momentum to pick up and he believes broad institutional adoption of cryptocurrencies will occur in the coming three to five years. «Each year, we are going to see some progress on that front. It’s not all going to come out at once,» he said.

«I’d be really surprised if five years from now, [adoption] hasn’t gotten substantially further. I’d also be really surprised if one year from now, every major financial institution was heavily participating in the crypto ecosystem. Somewhere in between is where you will see the bulk of the movement.»

Crypto M&A

And for banks that remain laggards for too long coupled with crypto firms that have deep ambitions, Bankman-Fried notes that there is potential for the latter to acquire the former, citing recent examples of futures and exchanges being bought by such fintechs. 

«One of the really powerful things that’s going on here is that crypto exchanges have built full stack products,» he explained, underlining their comprehensive capabilities across end-user platforms, back-end infrastructure, compliance and more.

«That makes them potentially really profitable businesses [and] I also think that makes them businesses that can potentially subsume other ones.»