Circle CEO compares the FTX crisis to Lehman Brothers’ collapse

For the crypto market FTX’s insolvency is comparable to the collapse of investment bank Lehman Brothers, which became the catalyst of the 2008 crisis. This was stated by Circle co-founder and CEO Jeremy Allaire.

1/ Some initial reflections on the FTX and Binance situation, and what impact we think this has on Circle, USDC and crypto more generally. These are fresh thoughts and will evolve. First, seeing a major industry peer and their loyal customer base impacted like this is god awful.

— Jeremy Allaire (@jerallaire) November 8, 2022

Having worked in the industry for ten years, I am disappointed that the technology created in response to the Lehman Brothers collapse has spawned its own copy. We can do better, — said the Circle CEO.

Allaire said that the current turbulence did not affect USDC, the co-signer of which is the company. Its activities have been regulated since 2014; the stablecoin is fully backed by government bonds and bank deposits.

«USDC possesses “detailed transparency” and enjoys the trust of many leading asset managers and custodians around the world», — he added.

Allaire stressed that during the bull market, price growth carried a wholly speculative nature, and the usefulness of the protocols was entirely absent.

The current downturn in the market underscored deep transparency problems faced by the industry — with tokens on the balance sheets of counterparty firms, he added.

Regulatory clarity in the United States was lacking, leading many firms to operate offshore.

As a result, “global Hydra-like firms” without territorial anchors emerged, often avoiding consequences for wrongdoing. They did not bear responsibility for manipulation and anti-competitive conduct, the Circle CEO explained.

Allaire urged the industry to move from speculation to a “phase of utility,” which depends on increasing transparency. He believes infrastructure foundations and public blockchains exist to enable this.

Additional benefits could come from increased DeFi activity and other networked products. This would require cryptographically verifiable identity, as well as significantly improved privacy-preserving technology.

CEO Coinbase Brian Armstrong also ruled out the impact of the FTX crisis on the bitcoin exchange he leads.

Earlier, Changpeng Zhao pledged to confirm reserves Binance after the announcement of a strategic partnership with a “troubled” platform.

Read ForkLog’s bitcoin news on our Telegram — cryptocurrency news, prices and analytics.