Sign in Subscribe
Asset Managers Featured

Why FTX and SBF may have triggered the next wave of institutional adoption

Ironically, it could well be that the legacy of Sam Bankman-Fried’s career in digital assets is the acceleration of regulatory clarity

Sui Chung

• 2 min read
Why FTX and SBF may have triggered the next wave of institutional adoption

Over the past week, CF Benchmarks has been fielding many enquiries from existing and potential licensees on the likely impact of the FTX debacle on the digital asset space, and specifically what it means for the steady stream of institutional adoption and regulated financial products that we’ve seen, much of which has been created with CF Benchmarks indices as an integral component. From the CME Bitcoin and Ether derivatives that are settled by our Bitcoin Reference Rate (BRR) and Ether Dollar Reference Rate (ETHUSD_RR) to BlackRock’s institutional Bitcoin Private Trust, our benchmarks underpin the most trusted regulated digital asset financial products.

Nevertheless, the events of the past five months may appear on the surface to have prevented any further institutional interest from culminating in actual products being launched.

From the doomed attempts at financial alchemy of LUNA, and the non-existent risk management practices of the crypto shadow banks Celsius and Voyager, to the outright fraud and malfeasance of FTX/Alameda, the space is now littered with every type of failure imaginable. For any serious financial institution, the prospect of entering the asset class in the short term through a product or service would seem to be a non-starter; the financial, reputational and, most importantly of all, regulatory risks are, right now, far too great.

However, I believe that the FTX episode has now injected significant urgency onto lawmakers and regulators to either accelerate implementation of regulatory proposals (such as MiCA in the EU) or to finalise key decisions such as agency jurisdiction (SEC or CFTC in the US).  Ironically, it could well be that the legacy of Sam Bankman-Fried’s career in digital assets is the acceleration of regulatory clarity; but not by the means he had imagined, with his hand influencing the pen of regulators and lawmakers. Instead, his influence might be a regulatory framework precipitated by FTX/Alameda, attempting to ensure that no one will ever be able to repeat his reprehensible actions.

In the medium-to-long term, this spur for regulators is likely to mean that regulatory clarity is finally forthcoming for the digital asset space, with institutions finally getting the clarity they seek; thereby removing the single biggest barrier to institutional entry into the asset class, and perhaps the beginning of digital asset exposure genuinely entering the mainstream investment landscape. There is already some evidence to suggest this might be the case. We may be seeing the beginning of a world where digital asset products and services are offered by traditional financial institutions, alongside the best of the crypto native breed of providers.

CF Benchmarks provides its FCA regulated benchmarks to regulated financial product providers to value, settle and maintain their products and eliminate the risks that can arise from pricing that is not representative of prevailing price or that lacks integrity. To ensure this CF Benchmarks has only ever utilised the market data of exchanges that it has been able to positively confirm meet its published Constituent Exchange Criteria. CF Benchmarks has never been able to validate the conformance of FTX.com or FTX.us to these criteria and hence neither of these exchanges has ever been a utilised as a source of input data to CF Benchmarks indices.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.

CF Benchmarks Ltd (“CF Benchmarks”), a company registered in England and Wales with company number 11654816 and authorised and regulated by the Financial Conduct Authority. Information about us can be found on the Financial Services Register (register number 847100).

Registered Office: 6th Floor One London Wall, London, United Kingdom, EC2Y 5EB.

You agree not to, and have no rights to, use the CF Benchmarks Data to create, calculate, issue, settle, maintain, support or develop any financial instruments (including but, without limitation exchange traded products, certificates, warrants, contracts for difference, swaps, binary options, structured products), indices, products, services (including but without limitation, portfolio management services, pre- and post-trade risk management services, or valuation services) or any other derivative works without the express written consent of CF Benchmarrks.

You agree not to analyze, reverse-engineer or disassemble any CF Benchmarks data and not to insert any code or product to manipulate the Website content in any way that affects any user’s experience. Unless CF Benchmarks gives you prior written permission, use of any Web browsers (other than generally available third-party browsers), engines, scripts, software, spiders, robots, avatars, agents, tools or other devices or mechanisms (such as crawlers, browser plug-ins and add-ons, or other technology) to navigate, access, copy in bulk, retrieve, harvest, index, search or analyse any portion of the Website is strictly prohibited.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of CF Benchmarks Ltd. Use and distribution of the CF Benchmarks data requires a license from CF Benchmarks or its authorized licensing agents.

All information is provided for information purposes only. All information and data contained on this website is obtained by CF Benchmarks, from sources believed by it to be accurate and reliable. Such information and data is provided "as is" without warranty of any kind.

CF Benchmarks, nor its directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or implied, either as to the accuracy, timeliness, completeness or merchantability of any information or of results to be obtained from the use of the CF Benchmarks indices or the fitness or suitability of the same indices for any particular purpose to which they might be put. Any representation of historical data accessible through CF Benchmarks indices is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by CF Benchmarks nor their respective directors, officers, employees, partners or licensors for any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this website or links to this website.

CF Benchmarks and its respective directors, officers, employees, partners or licensors do not provide investment advice and nothing accessible through CF Benchmarks, should be taken as constituting financial or investment advice or a financial promotion. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of any assets.

CF Benchmarks is a member of the Crypto Facilities group of companies which is in turn a member of the Payward, Inc. group of companies. Payward, Inc. is the owner and operator of the Kraken Exchange, a venue that facilitates the trading of cryptocurrencies. The Kraken Exchange is a source of input data for certain CF Benchmarks indices. Payward, Inc. is the owner and operator of the Staked, a venue that operates the block production nodes for decentralized PoS protocols on behalf of institutional investors. Staked.us is a source of input data for certain CF Benchmarks indices.

Please refer to the individual product family documentation for more information about applicable input data sources.