Industry insiders were quick to react Tuesday after news broke of a planned deal between two of the world’s largest crypto exchanges – Binance and FTX.
Binance co-founder Changpeng Zhao tweeted that the exchange had signed a letter of intent to fully acquire FTX. The news came after Alameda Research’s balance sheet showed that around 40% of the firm’s $14.6 billion assets were attributed to FTT, the token that powers FTX, as reported by CoinDesk last week.
FTT was trading at around $14.98 before the news broke of the FTX acquisition. Shortly after, it surged to $19.33. FTT is currently trading at $4.50.
See: Binance plans to buy rival exchange FTX in deal that shakes up crypto industry
“I’m fearful that the decentralization that we have all strived for is at risk and this is a perfect example of why,” said Daniel Keller, co-founder of Flux, a decentralized cloud infrastructure, in an email to MarketWatch.
“When we place the future of Defi and decentralization in the hands of a couple key industry players we are back to square one in legacy finance. My hopes are this ongoing game with leverage and high risk of user funds will end soon.”
Keller said that this is another reason why decentralized finance needs to grow quickly, adding that in a bear market, many crypto-related projects begin to falter and users’ assets are at risk.
Some questioned if this acquisition means crypto is dying out.
Pascal Gauthier, the CEO and chairman of Ledger, a hardware wallet for crypto assets, said crypto isn’t going away, but this acquisition highlights an important aspect of security and centralized exchanges.
“People have legitimate reason to worry about the security of their digital assets if one of the world’s largest centralized exchanges ends up in financial difficulties,” he said to MarketWatch. Gauthier further added that there will be more critical digital assets in our future than less, “which is why users should take ownership of their crypto keys.”
The combination of FTX and Binance has sparked conversations online about crypto keys, which are like a password made up of a long string of letters and numbers that allow people to access and manage their own crypto.
Centralized exchanges hold onto keys on behalf of users, with the promise of safety and convenience, but some industry insiders are urging people to take ownership of their own key. The phrase “not your keys, not your crypto” emerged on Twitter to inform people that no crypto exchange is too big to fail. This sentiment had already been popular within the decentralized finance community before the news of the acquisition.
“Clearly FTX did not go into this deal with Binance from a position of strength,” said Ryan Shea, crypto economist at Trakx, a platform for crypto index trading. “As an exchange FTX should not have much balance sheet risk and should have been able to process client withdrawals albeit with some delays due to infrastructure bottlenecks.”
“The speed with which this agreement has been reached suggests the situation at FTX and/or Alameda Research was more serious, potentially existential, in nature. Given this, I would strongly suspect that the authorities will be keen to analyse what went on and will use this latest crypto ‘incident’ as justification for bringing forward the implementation of more stringent regulation,” he added.
“Die-hard crypto anarchists may find such notions repellent but this is likely a necessary condition for broader public adoption of cryptocurrencies because regulation brings with it the with it the perception of legitimacy. Additionally, it will also help encourage institutional investors into the sector because they are used to operating in a regulated environment.”
FTX did not respond to request for comment. Binance did not immediately respond to request for comment.
