GuShiio.com In fact, the current online reasons for FTX’s refusal to pay users in China, Russia and other five countries do not sound reliable. Sister Sa’s team today briefly analyzed the possible factors from the perspective of legal and financial supervision.
If we go back to 2022, the FTX exchange founded by Sam Bankman-Fried is definitely one of the benchmarks in the crypto asset market industry. Of course, everyone knows the fate of FTX in the future. Sister Sa’s team has written several articles about the FTX exchange. With the collapse of FTX, one of the best bankruptcy liquidation cases in the history of cryptocurrencies has also attracted the attention of investors around the world.
After more than two years of bankruptcy reorganization, the FTX compensation plan has finally reached the implementation stage. The first round of compensation has been officially launched on the 18th of this month. According to FTX’s established compensation plan, convenience users with a claim amount of less than US$50,000 will receive preferential cash compensation of approximately 119% based on the November 2022 currency price. Such convenience users basically account for 98% of the total users. According to the latest reports, the first batch of US$800 million has been paid to 162,000 accounts, and the remaining funds will be allocated one after another.
01. Users in the mainland of China cannot receive FTX compensation?
However, just as everything was developing well, FTX’s creditor representative Sunil issued a document clearly stating that users from five countries including China, Russia, and Ukraine [cannot participate in] the bankruptcy distribution. Although users from these five countries are unable to participate in bankruptcy distribution, given that the proportion of FTX users in four countries including Ukraine, Russia, Nigeria, and Egypt is basically negligible, while the proportion of users in the mainland of China is as high as 8% of the total number of users on the platform, it can basically be said that this strategy of “unable to participate” bankruptcy distribution involves a large number of people and a huge amount of money involved. Although Sunil issued a document stating that users in five countries, including China and Russia, could not participate in the bankruptcy distribution, it did not explain the reasons for being unable to participate in the distribution. Arguments such as political factors, international relations factors, judicial factors, etc. are flying around, and there is no consensus.
02. Eliminate speculation on the cause of compensation
In fact, the current online reasons for FTX’s refusal to pay users in China, Russia and other five countries do not sound reliable. Sister Sa’s team today briefly analyzed the possible factors from the perspective of legal and financial supervision. To put it simply: First, users in China, Egypt and Nigeria cannot obtain compensation from the FTX clearing team, which is likely to be related to jurisdiction and compliance risks; second, Russia and Ukraine cannot obtain FTX compensation is likely to be related to SWIFT sanctions and wartime financial controls. Below, Sister Sa’s team will give you a detailed analysis for all old friends.
Jurisdictional obstacles and huge compliance risks
China, Egypt and Nigeria have one thing in common in the supervision model of virtual assets-that is, they have adopted a prohibitive supervision model. As early as 2017, the mainland of China issued the “Tips on Preventing the Risks of So-called” Virtual Currencies “such as Bitcoin. This notice can be regarded as an” implicit ban “on virtual currency transactions from the official level; In 2021, the “Notice on Further Preventing and Handling the Risks of Speculation on Virtual Currency Exchanges” issued by the People’s Bank of China and other ten ministries and commissions clearly stipulates that virtual currency does not have the same legal status as legal tender… Virtual currency-related business activities are illegal financial activities. This notice directly establishes my country’s regulatory authorities ‘attitude towards virtual currency-that is, adopting a prohibitive supervision model. Virtual currency-related businesses are illegal financial activities and are not protected by law.
Egypt’s regulation of virtual currencies is similar to my country’s. Article 4205 of the Egyptian Religious Decree clearly states that all commercial transactions based on virtual currencies such as Bitcoin are “halam”, which is a violation of Islamic law. As a result, commercial transactions based on virtual currency are illegal financial activities in Egypt.
The situation in Nigeria is more complicated. As early as February 2021, the Central Bank of Nigeria announced that virtual currency represented by Bitcoin “violates current laws.” At the same time, commercial banks are prohibited from conducting virtual currency transactions, and financial services related to virtual currency are illegal financial activities. However, due to the fragility of Nigeria’s financial supervision, the country has actually become the second largest user of Bitcoin and the hardest hit area for virtual currency money laundering and terrorist financing.
It can be seen from the virtual currency regulatory policies and virtual currency use of the above three countries that if FTX pays compensation to users in the three countries, it is actually contrary to the current prohibitive regulatory policies on virtual currency in the three countries, and it is very likely to fall into huge compliance risks. The FTX clearing team will naturally remain vigilant. Especially for Nigeria, the FTX clearing team cannot guarantee whether Nigeria users will launder platform users and finance terrorism. Therefore, in the view of Sister Sa’s team, the mainland of China users and Egyptian users are expected to pay if they wait, and Nigeria users are definitely in the foreseeable future.
SWIFT sanctions and wartime financial controls
What remains are the old enemies of Russia and Ukraine. Unlike the prohibitive regulatory models of China, Nigeria, and Egypt, Russia and Ukraine have adopted an embrace attitude towards virtual currencies. But unfortunately, these two countries each have their own problems. First of all, due to some well-known reason, Russia, as early as February 26, 2022, the United States, the United Kingdom, the European Union and Canada jointly announced the removal of major Russian banks from the SWIFT (Society For Worldwide Interbank Financial Telecommunications) system.
SWIFT’s function is to connect the payment clearing systems of different economies. That is, SWIFT connects entities with financial transaction needs around the world through the financial information transmission network it lays. Although strictly speaking, Russia can still carry out cross-border fund payment and clearing through one-on-one and connecting other financial institutions to the SPFS system, the convenience and applicability will undoubtedly be greatly reduced. Moreover, because it has been introduced into the SWIFT system, even if the FTX clearing team pays compensation to Russian users, it cannot solve the problem of payment of compensation funds in the short term. This may be the main reason why the FTX clearing team is unable to compensate Russian users.
For Ukraine users, the inability to pay is likely to be related to Ukraine’s wartime financial controls. Due to the wartime financial control policy in Ukraine, the approval cycle for large-scale cross-border remittances and large-scale cross-border capital flows has basically reached a standstill, which directly resulted in the FTX clearing team being unable to pay compensation to Ukraine users.
03. Write at the end-What should we do for China users?
Sister Sa’s team is still quite optimistic about this. In the future, the FTX clearing team is likely to establish a special clearing channel with countries that adopt a prohibitive regulatory model (the mainland of China, Nigeria, and Egypt), or may use stablecoins for online payments (although this plan is likely to bring compliance risks). Overall, the only thing that the mainland of China users can do is wait. After all, even if a special clearing channel is built, it will require cooperation and breakthroughs from various countries and international financial regulatory frameworks.
