FTX’s European licence could be suspended following the platform’s crash

FTX’s European licence could be suspended following the platform’s crash

By Hassan Maishera - min read

Cryptocurrency exchange FTX risks losing its European licence after the company filed for bankruptcy a few hours ago.

FTX’s European Union license in Cyprus could be suspended, with the crypto exchange coming under pressure. 

According to the Bloomberg report, FTX Europe could have its European Union investment firm licence suspended. Citing people familiar, Bloomberg said the licence could be suspended as soon as possible.

FTX received the licence in April of this year. The licence allows the cryptocurrency exchange to operate across Europe. FTX was issued the licence by the Cyprus Securities and Exchange Commission. 

To receive the licence, FTX had to meet standards outlined in the European Union’s MiFID II directive. Bloomberg added that the standards include the segregation and protection of client funds, operation transparency and capital adequacy.

FTX’s troubles began earlier this week after a balance sheet relating to its sister trading shop Alameda Research was leaked. According to the balance sheet, FTX and Alameda Research had significant liabilities and holdings of FTT, the native token of the FTX exchange. 

Rival crypto exchange Binance now threatened to sell off its FTT holdings, leading to increased pressure on FTX and Alameda Research. 

FTX began to face liquidity issues within hours of the leak, with reports indicating that FTX used customer funds to fund Alameda Research, the hedge fund owned by Sam Bankman-Fried.

Binance agreed to acquire FTX and take on its liabilities but later canceled the deal after reviewing FTX’s finances. 

By the end of the week, FTX announced that it had filed for Chapter 11 bankruptcy, alongside its affiliates, including FTX US and Alameda Research. CEO Bankman-Fried also resigned from his position, and Chicago-based attorney John J. Ray III was appointed to head the company. 

FTX is currently seeking bankruptcy protection in Delaware. The cryptocurrency exchange is currently under investigation by agencies, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).