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posted by janrinok on Sunday December 18 2022, @02:23PM   Printer-friendly
from the regulating-self-regulation dept.

Germany wants countries to regulate the crypto industry after the FTX and Bankman-Fried debacle- Technology News, Firstpost:

Germany's top regulator this week called for global regulation of the cryptocurrency industry to protect consumers, prevent money laundering and preserve financial stability.

Mark Branson, the president of Germany's financial market regulator BaFin, also known as the Federal Financial Supervisory Authority of Germany, said a that hands-off approach that would "just let the industry grow as a playground for grownups" was the wrong tactic.

"We've seen the self-regulated world. It will not work," Branson told journalists in Frankfurt on Tuesday evening.

Branson was speaking hours after U.S. prosecutors accused Sam Bankman-Fried, founder of cryptocurrency exchange FTX, of misappropriating billions of dollars and violating campaign laws in what has been described as potentially one of America's biggest financial frauds.

[...] Regulation of the industry has been loose and patchwork at best. Germany requires licences for banks to deal with cryptocurrency.

[...] The European Union has been working on a new Markets in Crypto Assets Regulation (MiCA) that some, including European Central Bank President Christine Lagarde, say would need to be broadened out in a future iteration and branded "MiCA 2".

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  • (Score: 1) by khallow on Friday December 23 2022, @01:15AM

    by khallow (3766) Subscriber Badge on Friday December 23 2022, @01:15AM (#1283663) Journal

    What happened was that banks circumvented their regulated leverage ratio (the amount of cash they need to have at hand versus the amount of loans outstanding). They did so by creating so-called SIVs (structured investment vehicles), whose only purpose was to offload the banks own loan securities, then slice-and-dice 'em with other securities, then sell those mixes as packages to third-party investors.

    In other words, banks "circumvented" regulated leverage ratio by selling off their loans to other parties? Sounds like their leverage ratio didn't actually change for real.

    The devil was with the SIVs, and their limited lifeline (in terms of financial support when things went South) to the banks that created those very SIVs in the first place. The uncertainty with regards to those, and consequentially the CDO/CDS market, was what led to a freezing of the interbank market by the middle to end of October that year; and that was the real crisis.

    In other words, the issuing banks weren't threatened by these SIVs going south, their investors who very often were other banks, were.