Economy The founder and CEO of FTX, detained in the Bahamas at the request of the US
Cryptocurrencies are in chaos
after the arrest late yesterday afternoon in America of Sam Bankman-Fried.
SBF, as it is colloquially known due to its acronym), is the founder and CEO of FTX.com, the second largest market for these assets in the world, which declared bankruptcy on November 11.
SBF has been
charged with eight counts
by the Southern Manhattan Prosecutor's Office, which usually handles most of the big economic crimes in the US, since Wall Street is in its area of jurisdiction.
The authorities believe that the 30-year-old financier committed fraud against FTX clients and against the creditors of his
Alameda
hedge fund .
The indictment document claims that Bankman-Fried
stole money from FTX depositors and wired it to Alameda
.
It also accuses him of violating the legislation on the financing of political parties.
SBF was one of the largest donors to the Democratic Party, where some considered it the future George Soros, referring to the billionaire financier and philanthropist who has supported center-left causes around the world.
But the
crypto millionaire
could also have given large sums of
black money
to the Republican Party, that is, donations that support campaigns but do so anonymously.
Crypto, meanwhile, has risen today, but analysts say that's due to relatively good inflation data for November, which narrows the range of the Federal Reserve's rate hikes.
Cryptocurrencies have been extremely vulnerable to interest rates,
thus destroying their chances of being any kind of alternative to
central bank-issued and backed currencies, and are closing out a catastrophic year, with value declines of two-thirds over the year. the case of the supposedly strongest ones -bitcoin and ethereum- and practically zero prices in the case of the weakest.
It is estimated that there are around 9,300 crypto in the world.
Be that as it may, the FTX shock wave is spreading throughout the crypto world.
Binance
, the largest cryptocurrency market in the world and which was about to buy FTX when it entered into crisis,
has suffered a withdrawal of 1.9 billion dollars
(1.8 billion euros) from its clients.
That withdrawal has been both in ethereum and in USDC, a
stablecoin
that has its price fixed with the US dollar.
The
stablecoins
are theoretically more solid than other cryptocurrencies,
since their value is fixed to an asset
, in this case the dollar.
But that doesn't make them immune to crises, in the same way that currencies that have a fixed exchange rate - like the Argentine peso in the 1990s, against the dollar - can collapse if investors don't believe they are sufficiently backed by the reference asset.
Money market funds
For Cornell University professor and analyst at the
think tank
Brookings Institution, Eswar Prasad, the clearest example of what can happen with stablecoins
is
that of the so-called money market munds (money market funds), a type of institution financial institutions that collapsed en masse during the subprime mortgage crisis of 2008, thus opening a new front in the near-collapse of the global economy that year.
Prasad, who has just published in Spain 'The future of money' (La Esfera de los Libros), about the cryptocurrency boom, has explained to EL MUNDO how the crisis of money market funds was and its similarities with the
stablecoin
situation
.
According to Prasad, "money market funds are funds that are based on their portfolios of Treasury bonds and other liquid and safe assets, in the same way that stablecoins are, supposedly, fully supported
by
reserves. During the 2008 crisis, Those funds had to face a flurry of calls for withdrawals, and with the bond market in turmoil,
a couple of the biggest found themselves with net asset values below zero
."
That means the technical bankruptcy of those financial institutions, which were barely regulated before the crisis, since they were supposed to be extremely safe.
Now, with
stablecoins
, "there is a concern that even assuming they are fully backed by safe assets (which remains to be seen)
they will face similar liquidity problems
. If that happens, it is possible that those problems could be passed on to the underlying assets." that back those currencies", since, in order to return the money to investors, the institutions in which those currencies are kept will have to sell those assets.
That could trigger a cascade of selling and falling prices in the financial market that extends beyond cryptocurrencies.
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