December 1, 2022

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- It will happen again until there are regulations - E24

– It will happen again until there are regulations – E24

The Norwegian Stock Exchange managed to dump two-thirds of its value into FTX before it all came to a halt. – The NBX boss says everyone has been stuck in bed to some extent.

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“This is a tragic situation for the entire industry,” Stig Aleksander Kjos-Mathisen, head of Norwegian cryptocurrency exchange NBX, Norwegian Block Exchange, told E24.

– Everyone was more or less in bed, he says.

Last week, news of FTX’s liquidity stress and subsequent bankruptcy hit the crypto industry like a bomb. In one week, FTX went from being one of the largest and most well-known crypto companies in the world, with a $32 billion valuation, to a massive bankruptcy estate.

– FTX made a strong impression on the entire industry. The exchange is probably the one with the largest number of institutional traders, so this affected a pretty broad spectrum. Kjos-Mathisen says it has bypassed not only the retail market, but also funds and large players.

Among the nearly 130 companies affected by bankruptcy is his own company, NBX, in which Bjorn Keuss is chairman and one of the principal owners.

Get rid of thirds

Before all the hype, when FTX was still a recognized and seemingly stable crypto exchange, NBX owned FTX-symbolsA token is a tradable asset or instrument that exists on its own blockchain and allows its holder to use it for investment or financial purposes. for approximately NOK 300,000, which is a relatively small exposure.

According to Kjos-Mathisen, NBX used the platform to secure crypto or inter-currency exchange positions, and confirmed that they had no customer funds there – only the company’s own funds.

Then, on November 2, Coindesk published a leaked document showing that Alameda Reserach, a hedge fund led by FTX CEO Sam Bankman-Fried, owned an unusually large number of FTX tokens.

FTX and Alameda were supposed to be separate companies, but the report showed otherwise, according to the report. The New York Times.

— was a good enough indicator to look at our exposure and reduce it, says Kjos-Mathisen.

They dumped around NOK 200,000 worth of FTX tokens, and you were left with 100,000.

Then it really hit for FTX. Cryptocurrency exchange Binance announced that it would sell off its entire FTX token holdings, and people flocked to the platform to do the same. Thus FTX ended up in a liquidity crunch.

– On Tuesday after lunch, we tried to pull out the last 100 thousand people, but by that time it had already stopped. Kjos-Mathisen says they were still processing withdrawals at the time, but there may have been many more on the waiting list.

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NBX has not yet written off the loss. Kjos-Mathisen believes there are great values ​​in the company.

– There is a consolation for someone who has a lot of money locked up there, because there are values ​​in the estate. How much will each be, it’s too early to say.

Sam Bankman-Fried founded FTX in 2019. He stepped down as CEO when the company filed for bankruptcy protection.

It weakens confidence

Sam Bankman-Fried founded FTX in 2019, and since then the company has grown rapidly. Recently, the company was valued at $32 billion.

The bankruptcy revealed that FTX had only $900 million in cash, compared to $9 billion in liabilities.

Being so short, it was very difficult, says Kjos-Mathisen.

He hopes that FTX’s bankruptcy will force international regulations.

– It obviously erodes confidence in the entire industry. This will force international regulations more quickly. We may get stricter regulations than the industry wanted, but it’s important to weed out the bad actors, he says.

It is especially important to look at the exchanges that have their own CodeA token is a tradable asset or instrument that exists on its own blockchain and allows its holder to use it for investment or financial purposes.as FTX thought.

– FTX used its token to “print money”. When a significant portion of the balance is one’s own token, one has an incentive to make back-up purchases of one’s own token in order to maintain or increase value, for example to use it for a loan, he says.

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It was fun to have a separate NBX token, but you can see it was scary to start with before it was properly structured, he says.

– Could something similar happen again, in your opinion?

– If one thing is certain, it is that this will happen again until there are regulations.