FIN545: In 2022, we witnessed the failure of major crypto businesses such as 2AC and Luna. The impacts of these failed businesses: Technological Innovations in Finance Coursework, SUSS, Singapore

Question 1

In 2022, we witnessed the failure of major crypto businesses such as 2AC and Luna. The impacts of these failed businesses have been devasting for investors who have wagered their entire life savings to these platforms. While investigations are ongoing to understand the reasons behind these failures, there were some moments of reflection and soul-searching among the crypto community.

For example, Samuel Bankman-Fried, the founder of the crypto exchange FTX, reflected during an FT interview [1] that he believed less than 100 tokens have real-world value, even though his own exchange has listed in excess of 100 tokens. In short, he believed that most of the crypto tokens will fail and only a selected number will be successful.

In this ECA, we seek to explore and understand the events that are unfolding in front of our eyes and use our understanding to predict the future developments of these new businesses.

Given the large number of crypto tokens listed and traded in a crypto exchange, discuss, and examine how would you evaluate if a listed token has real-world value.

Question 2

Watching the rapid rise of these new businesses, crypto or not crypto, has instilled a new outlook in banks. For example, in Singapore, the CEO of DBS, Piyush Gupta has said that

At DBS, we act less like a bank and more like a tech company[1]

Discuss how banks view these new entrants and conclude how they have adapted their practices to compete with these new players.

Question 3

With the dramatic growth and subsequent failure of these crypto businesses, regulators are taking a stance now to limit the reach of these new risky assets/businesses to retail investors. Some are questioning why the regulators did not intervene earlier to prevent the failures from happening in the first place, and hence limit the losses experienced by retail investors.

If you are a financial regulator, discuss three (3) factors that you will consider when you decide if you want to regulate a new business. The three (3) factors that you have suggested should be applicable to all new businesses, not just new crypto businesses.