The FTX brouhaha has further highlighted a problem with US regulation: Securities and Exchange Commission (SEC) ambiguity has forced the top crypto exchanges to operate offshore, leaving customers exposed to bent business practices.
Notably, FTX’s American affiliate, FTX.US, resisted the meltdown. All deposits are backed one-to-one with real money, according to CEO Sam Bankman-Fried, unlike its global counterpart, which seems to have operated more similar to a fractional reserve system.
As well, regulations restricted US-based users from buying FTX’s native token FTT, which came under pressure after Binance said it would dump its holdings of the coin, and even moreso once the acquisition fell through.
This ring-fencing by regulators may have encouraged firms like FTX to set up offshore exchanges, effectively leaving customer assets exposed to high-risk unregulated scenarios.
Before it blew up, the flagship FTX platform handled some $2.6 billion in daily trade volume. The US regula
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