As Asia’s premier cryptocurrency hub, Singapore will have to answer some tough questions. At least one of them has gained urgency following the bankruptcy of Sam Bankman-Fried’s digital-asset empire: “What do we do about Satoshi’s original sin?”
Satoshi Nakamoto, the pseudonymous founder of the Bitcoin network, left a major gap in his original 2008 white paper. He didn’t suggest an obvious way for people to swap their dollars or other fiat cash for decentralized currencies like Bitcoin or Ether.
Specialized crypto bourses like FTX, one of the world’s largest exchanges of digital assets until recently, burst forth through this conceptual hole. They helped create spectacular wealth, as evidenced by Bankman-Fried’s now-eviscerated US$26 billion ($35.89 billion) fortune. But although they chose to go by the name “exchange,” they weren’t satisfied taking a fee from customers. The real prize was in becoming shadow banks. Globally, regulators let them get away with it, even allowing them to ride on the reputation of some of the world’s largest financial centres.