Australia’s securities regulator, the Australian Securities and Investments Commission (ASIC), dealt a heavy blow to the cryptocurrency industry as it announced the cancellation of the license for FTX Australia, the local subsidiary of the collapsed U.S. cryptocurrency exchange FTX. Effective from July 14, this development marks a significant setback for FTX in the aftermath of its filing for U.S. bankruptcy protection in November of the previous year.
The ASIC’s announcement, made on July 19, clarified that FTX Australia would still be permitted to offer limited financial services during the process of concluding its client-related affairs until July 12 of the following year. However, the regulator emphasized that FTX Australia remained obligated to make arrangements for compensating clients until that time. With approximately 30,000 retail clients and serving 132 local companies, FTX Australia’s operations have garnered notable attention within the Australian market.
The suspension of FTX Australia’s Australian Financial Services (AFS) license in November 2022 effectively halted the creation of derivatives and foreign exchange contracts for local clients. The regulatory action further added to the mounting challenges faced by FTX, which was once hailed as a star of the crypto industry with a valuation of $32 billion in January 2023. FTX filed for bankruptcy protection in the United States last November, citing its inability to fully reimburse customers who had entrusted funds to its exchange.
The fallout from FTX’s collapse reverberated across the cryptocurrency landscape, prompting intensified scrutiny from global regulators. Additionally, FTX’s founder, Sam Bankman-Fried, is currently facing a criminal lawsuit by the U.S. government on charges of alleged fraud. Bankman-Fried vehemently denies these allegations and has entered a plea of not guilty.
In November of the previous year, ASIC had already suspended FTX Australia’s license until May, effectively revoking the permission to engage in derivative and foreign exchange contracts with retail and wholesale clients. In a recent report to a U.S. bankruptcy court, the restructuring chief overseeing FTX’s global entity revealed the recovery of approximately $7 billion in liquid assets. However, it is estimated that a total of $8.7 billion worth of customer assets may have been misappropriated.
Reports suggest that FTX may pursue a fresh start by relaunching as an entirely new exchange. The restructuring team has reportedly initiated discussions with potential parties interested in providing financial backing for this reboot, indicating a potential future direction for the embattled cryptocurrency exchange.
The cancellation of FTX Australia’s license by ASIC underscores the challenges faced by cryptocurrency exchanges and the growing focus of regulators on ensuring investor protection and market integrity within the evolving digital asset landscape. As the industry grapples with ongoing developments, the fate of FTX and its potential resurgence will undoubtedly be closely monitored by market participants and regulatory bodies alike.
