February 9, 2023

Filipino Guardian

Sentinels of Filipino Free Press

FTX collapse shatters crypto dreams in Africa and beyond

REUTERS

LAGOS/BANGKOK – Days before the collapse of his FTX cryptocurrency exchange, co-founder Sam Bankman-Fried tweeted “Hello West Africa!” – his latest nod to a region where a growing number of kitchen table investors had put their trust and savings in FTX.

In South Africa, Nigeria and Ghana, FTX held a series of spectacular events in the months leading up to its United States bankruptcy filing on November 11, sending shockwaves through the crypto world and crashing the prices of major coins.

At least $1 billion in customer funds have disappeared from the collapsed crypto exchange, Reuters reported, and it is now the subject of an investigation by authorities in the Bahamas — where it was based — for “criminal misconduct.”

In Nigeria, where many young people view cryptocurrencies as an opportunity for income amid economic woes such as double-digit inflation and high unemployment, FTX’s demise has been painful.

“It hurts more than I can express,” said Osarieme Aghedo, who works in marketing for a Nigerian startup and had $8,720 in FTX when news of his implosion broke on Twitter.

He tried in vain to withdraw his money, which he intended to use to buy a car the following year.

Mr Aghedo said he had been trading digital currencies since 2017 and previously lost money when their values ​​plummeted.

But the FTX loss hit him harder, he said, because he thought it was “risk free” and kept his savings there.

Like him, many Africans used FTX as a bank as it offered an 8% annual interest rate on the stablecoin stored on the platform. Customers also used FTX to convert their local currencies into dollars.

Even as regulators crack down on crypto, people in developing countries are adopting virtual currencies to avoid high commissions on remittances and preserve their savings in times of hyperinflation and political instability.

Many exchanges have been courting users in Africa, and crypto adoption is growing on the continent, with Nigeria ranking 11th on a global index by research firm Chainalysis, which also includes Kenya and Morocco in the top 20.

Despite the FTX blow, Mr. Aghedo said he will not abandon crypto.

“Crypto has connected the global economy. I receive and pay people in crypto from many countries and that would have been impossible before,” he said.

NO PROTECTION

Cryptocurrencies were designed to be free from authorities such as governments and central banks. They allow peer-to-peer transmissions between users online without intermediaries.

Their relative anonymity provides a safe haven for criminals, extremist groups and sanctioned governments – but advocates say they also support citizens caught in crisis.

Now, crypto’s most well-known collapse in recent years has left millions in the lurch, and it’s unclear how many FTX users – estimated at around 1 million in the United States and many more around the world – will be able to recover their funds.

South Korea, Singapore and Japan saw the most visitors to FTX.com through October, according to data from crypto site Coingecko.

Singaporean Edward Choy was at work when he heard about a liquidity crisis on FTX. He immediately started withdrawing his deposits just hours before the withdrawals were suspended.

“I was able to withdraw about 90% of my funds,” said Mr. Choy, 43, an actor and speaker who has been a crypto investor since 2017.

“But I know a lot of others got nothing – some had invested almost their entire fortune in FTX and have now lost it all,” he told the Thomson Reuters Foundation.

Cryptocurrency regulation has come into focus after multiple platforms collapsed this year and heightened volatility, with Bitcoin down more than 70% from an all-time high of $69,000 in November last year.

Several investors have also accused regulators of failing to regulate platforms and protect users.

In a Facebook group for crypto users in Singapore, Alfred Lee wrote: “Moved my six figure portfolio from Binance to FTX. I didn’t manage to get out fast enough as I was on vacation,” he said, referring to his move after Binance was banned in Singapore last year for violating local payment services rules.

The Monetary Authority of Singapore (MAS) said it could not protect local users from FTX’s collapse because it failed to license FTX and operated the exchange offshore.

“The main lesson learned from the FTX debacle is that trading any cryptocurrency on any platform is dangerous,” MAS said in a statement last week.

“As MAS has repeatedly stated, there is no protection for clients trading cryptocurrencies. You can lose all your money.”

In Ghana, where authorities have not commented on FTX’s collapse, 21-year-old content creator Elisha Owusu Akyaw, who often posts about crypto on Twitter and TikTok, said he had $200 on FTX when it collapsed.

“It’s only worth $6 now,” he said, adding that he used to hold the equivalent of about $70,000 on the platform but withdrew most of it a few months ago when the value of the Cryptocurrencies fell.

Mr. Akyaw, who has worked with FTX and other exchanges to showcase their products to his more than 12,000 followers on Twitter, said he was concerned about how the ongoing chaos would impact his role as a crypto influencer.

“The money I lose is not my priority,” said Mr. Akyaw, who started trading crypto as a teenager.

“It’s the impact it’s had on the reputation of the crypto industry… it’s about trust in a space that I’ve dedicated most of my life to.” — Thomson Reuters Foundation