[ad_1]
© Reuters The Chicago Fed breaks cryptocurrencies for 2022
- The Federal Reserve Bank of Chicago has issued a letter on cryptocurrencies for 2022.
- The bank’s letter covers the details of the major crypto platforms that collapsed in 2022.
- The collapsed companies include Celsius, Voyager Digital, BlockFi, Genesis, and FTX.
The Chicago Fed has released a letter compiling major cryptocurrencies that occurred in 2022. The bank cited interesting background and data, and when these companies filed for bankruptcy. The message takes users across Celsius, Voyager Digital, BlockFi, Genesis, and FTX.
The Chicago Fed stated that due to massive user withdrawals and investment losses, many crypto-asset platforms experienced significant declines in 2022. These platforms offered a range of cryptocurrency-related products and services, such as custody, trading, and high-yield investments.
However, the Federal Reserve Bank of Chicago stated that because customers could withdraw funds whenever they wanted while the platforms used them for speculative and risky investments, their business models were open to risk. There was a major incident involving clients withdrawing a quarter of their funds in one day on the FTX platform.
The promise of high return investment products
Clients on these platforms have been particularly drawn to the high-return investment items. Clients looking for profitable returns were drawn to them because they were promised guaranteed interest rates that were higher than those offered by traditional investment options.
The main investment options included stablecoins and non-stable crypto assets, with interest rates ranging from 7.4% to 9%. Higher than normal interest rates have been offered by some platforms on a few of the lesser-known crypto assets that they have marketed.
What happened?
An examination of bankruptcy filings revealed information about customer withdrawals from other platforms. Among the main reasons for cryptocurrency trading was the failure of Three Arrows Capital (3AC) and the collapse of the TerraUSD stablecoin.
Customers quickly withdraw their funds in order to prevent potential losses. The platforms’ exposure to 3AC, which has lent billions of dollars to the hedge fund, has been a significant source of infection. Massive client outflows in the wake of FTX’s November 2022 bankruptcy exacerbated liquidity issues for these platforms.
Data from the Federal Reserve Bank of Chicago shows that there were $1.4 billion in withdrawals and $0.58 billion in percent between May 9 and June 12, 2022. FTX saw the highest withdrawals from November 6 to November 11, 2022, with over $7.81 billion .
There is an urgent need for regulatory measures, as evidenced by the significant event of the collapse of crypto-asset platforms in 2022.
Speaking of regulatory scrutiny, the Chicago Fed stated:
“The offering of high-yield investment products by platforms has been under regulatory scrutiny since at least 2021, when Coinbase (NASDAQ:) announced that it had received a warning from the US Securities and Exchange Commission (SEC) that a potential investment product could be a security.”
The lack of deposit insurance and the attractiveness of high-return investments have resulted in a volatile atmosphere subject to threats and financial crises. To protect investors and maintain the stability of the crypto-asset market, policymakers must address these issues.
Post Chicago Fed Breaking Crypto 2022 Debuts Coin Issue.
[ad_2]
Source link
