Why SBF’s arrest means freedom for everyone else in the crypto space

Waking up last week to the news of Sam Bankman-Fried’s arrest and criminal charges was a huge relief. This individual, once a leading and inspirational visionary of crypto’s potential to create financial freedom, broke public trust.

Since the collapse of FTX, my algorithmic trading tools company, which has never handled client funds but has helped them execute trades on platforms like FTX, has heard from hundreds of our clients who now have no access to their funds on the exchange .

People have called us crying and asking how we can help them. “How could anyone do this to us?” It’s heartbreaking. It’s criminal. But at least now justice is taking its course.

Bankman-Fried’s indictment and arrest is a positive development, not only because it’s part of a functioning law enforcement and judicial system, but because it’s a sign that crypto could weather the ongoing storm. For the crypto economy to survive, governments must at least enforce basic laws in the sector – as they have done at last done with the indictment against Bankman-Fried. But the government is taking too long to develop coherent regulations. As an industry, we cannot afford to wait.

Beyond government enforcement, the industry needs to be more proactive and coherent to develop its own standards and system of self-regulation. Now, if FTX’s collapse finally brings about these developments, crypto can thrive.

When cryptocurrency history is written, chroniclers will likely use November 11, 2022 to refer to the change in what crypto and DeFi are all about – “BFTX” and “AFTX”, before and after the bankruptcy and subsequent Shame on the company that many saw as the best chance for cryptocurrencies and DeFi to “go mainstream.”

With the collapse of the Bankman Fried exchange, even former proponents of crypto are turning away and taking steps to restrict or even ban its use. The idea of crypto and DeFi as a path to financial freedom and freeing finance from gatekeepers – formerly a common topic in articles and blog posts – is increasingly being questioned.

However, these ideas are not dead. The negligence, bad practices, and perhaps even blatant fraud that led to the collapse of FTX must be separated from the principles that crypto stands for.

These are principles that speak to billions of people around the world: freedom of trade, detached from the system that dictates not only how we do business, but whether we can preserve the value of our earnings.

For these principles to thrive, the government doesn’t even need to develop a new regulatory framework for the industry, it just needs to enforce basic laws. In addition to the charges against Bankman-Fried, recent news that the US Department of Justice is considering money laundering allegations against Binance, another major crypto exchange, is steps in the right direction. Enforcing laws rather than letting the sector rot with millions of people losing money will go a long way in making it a legitimate space and protecting consumers from outright fraud.

After a decade of talking about crypto regulation, nothing has happened. Any government regulation would likely favor the traditional financial system with a seemingly endless boom-and-bust cycle steered by the Fed to either spur growth or curb inflation as the gatekeepers see fit.

Instead, the various key players in the crypto industry must come together and develop basic financial protocols, such as custody of funds, risk management standards, and methods of communicating full risk to the public. In addition, the industry must develop internal standards for enforcing and monitoring these financial protocols, as well as providing transparency in other parts of its operations. We’ve seen similar successful operational standards efforts in many other industries, including 5G and the Internet. This will give the average person more confidence, security and understanding.

Friedman’s arrest is not just the first step in bringing him and FTX to justice. It will help create a viable crypto sector – and fulfill the ideals of freedom and transparency on which the industry was built.

Dmitry Gooshchin is COO and co-founder of EndoTech.

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