Even though the incident now seems to be in the rearview mirror for many, FTX’s collapse in November 2022 marked a pivotal moment in the cryptocurrency economy, triggering a wave of distrust and instability that continues to reverberate throughout the industry to this day.
Once valued at approximately $32 billion, FTX’s downfall was precipitated by a number of revelations regarding its close ties with Alameda Research, a trading firm also led by FTX founder Sam Bankman-Fried. In fact, as soon as the questionable financial practices came to light, customers proceeded to facilitate mass withdrawals, culminating in FTX declaring bankruptcy after facing an $8 billion shortfall in customer deposits.
This event not only decimated FTX but also sent Bitcoin’s value plummeting to under $16,000, a stark contrast to its all-time high of nearly $69,000 exactly a year earlier.
The impact of FTX’s collapse extended beyond immediate financial losses, reshaping the crypto regulatory landscape, with there being numerous significant pushes for increased oversight and regulation across the globe.
Not only that, but the aforementioned shifts also culminated in venture capital investments into the space plummeting from $6.12 billion in Q1 2022 to just $870 million in Q1 2023, reflecting a cautious approach from investors wary of the risks associated with the industry.
Establishing a new standard for centralized exchanges
While centralized exchanges (CEX) still hold significant value within the crypto realm, the events surrounding FTX have highlighted the urgent need for these platforms to alleviate the anxiety held by their backers — especially when it comes to the potential mismanagement of their funds.
As a result, there has been growing recognition that CEXs need to implement proactive measures to restore trust and confidence in the market.
One emerging solution in this regard is a concept called “Proof of Funds,” which aims to provide transparency and assurance to investors regarding the financial health and solvency of the exchange storing their assets.
To elaborate, the approach involves exchanges publicly demonstrating that they have sufficient reserves to cover all customer deposits, eliminating the risk of a sudden shortfall that could lead to a collapse like the one experienced by FTX.
Boxwind, a soon-to-be-released exchange, harnesses the power of this approach. It leverages the extensive experience and resources of the Exinity Group, which has provided leveraged trading to over two million customers through its global brands Alpari and FXTM.
One of Boxwind’s key priorities is to implement the aforementioned ‘Proof of Funds’ mechanism, ensuring that customers have complete confidence in the platform’s financial stability as well as the safety of their digital assets. Furthermore, the platform plans to focus on serving emerging markets, where access to financial services and options for buying and selling cryptocurrencies have historically been limited.
Beyond its use of ‘Proof of Funds,’ Boxwind is also dedicated to making itself as user-friendly as possible, catering to both new and seasoned traders. The platform’s emphasis on providing educational resources and a high level of customer support will ensure that clients feel confident and secure when facilitating trades.
Lastly, as part of its upcoming launch and future expansion strategy, the exchange plans on obtaining local licenses in the markets it plans on serving, prioritizing a grassroots approach to regulatory compliance. By building strong relationships and partnerships within specific countries, Boxwind aims to establish a solid foundation of credibility.
Looking ahead
While the fallout from the FTX collapse has undoubtedly cast an unwanted shadow over the crypto industry — greatly eroding trust and confidence among investors — platforms like Boxwind are stepping up to the mantle by showcasing a level of commitment toward transparency, financial stability, and customer-centric innovation that is not common among CEXs.
Moreover, by prioritizing regulatory compliance and asset transparency, Boxwind is primed to empower customers across emerging markets, allowing them to participate in the ongoing digital asset revolution with the touch of a button.
