Here are the implications of the fall of the FTX cryptocurrency market in Morocco

The second largest cryptocurrency exchange in the world filed for bankruptcy on November 11. According to Blockchain specialist Badr Bellaj, the FTX platform was used by many Moroccan investors. This event risks increasing the Central Bank’s mistrust and need for transparency around the possible use of cryptocurrencies in Morocco, and slowing down the arrival of new investors in the field.

The universe of cryptocurrencies has been greatly upset in recent days. FTX, one of the leading players in the industry, filed for bankruptcy on November 11, after a lightning rout. In question, the press revelations which highlighted very poor management and investments in crypto-assets issued by FTX in risky financial arrangements on the part of its Almadea Research fund.

But will this bankruptcy, which caused Bitcoin and Ether to plunge by more than 20% in the space of a week, have an impact in Morocco, both on legislation and on investors?

The regulator is likely to become even more cautious

The Central Bank announced during the press briefing of March 23, 2021that Morocco was part of the global debate with the creation of a institutional committee in charge of evaluating the risks and benefits of cryptocurrencies.

More recently, in July, Bank Al-Maghrib (BAM) received Changpeng Zhao, CEO of Binance, the largest cryptocurrency marketplace in the world. The Governor of the Central Bank had specified that a preliminary draft law was being drawn up. “This work is done on the basis of a benchmark of other central banksand with the technical support of the World Bank and the International Monetary Fund”, he specified. Nevertheless, the wali of Bank Al-Maghrib, still maintained a very cautious approach towards these assets, not forgetting to underline their “speculative” nature.

With the bankruptcy of FTX, the new deal could slow down the progress made so far. This is at least the opinion of Badr Bellaj, a fine connoisseur of cryptocurrencies and specialist in Blockchain technology. “The first impact of this bankruptcy will probably be taken into account by the Moroccan regulator, Bank Al-Maghrib. Indeed, they are working on the regulatory aspects around cryptocurrencies through authorizations to operators. As could be the case for an actor like Binance. It’s a very logical vision. But seeing the second largest market going bankrupt due to mismanagement will send an alert against these exchanges.”

This incident will therefore push the Central Bank to put even more emphasis on security and transparency in the work carried out on these assets. “I think that BAM will strengthen the regulations to ensure maximum protection for Moroccan investors, in the event that in the future we have this type of platform operating in Morocco”, indicates Badr Bellaj. But what is also feared is a step back from the Central Bank and a dilution of confidence in these platforms. “BAM may think that these trading markets are not trustworthy and that it is waiting for a clear development in the regulations on the American side, for example”, continues the expert.

Basically, the impact will be positive because it will aim to ensure maximum security for potential investors. “In the event of opening, the regulation will be stronger, which is a good thing because these exchange platforms are important but fragile because they are not regulated.”

This bankruptcy will also have an impact on Moroccan investors who have invested in cryptocurrencies.

FTX was used by experienced cryptocurrency investors in Morocco

Naturally, cryptocurrency investors have been affected by the fall of FTX and its consequences, including a sharp drop in the prices of certain assets such as Bitcoin or Ether, the two largest virtual currencies today.

According to Badr Bellaj, in Morocco, this bankruptcy will above all put a brake on future investors. “I think this bankruptcy will cause a form of skepticism and fear among people who wanted to invest in cryptocurrencies but have not yet done so. This kind of event generally dissuades newcomers.”

But what about Moroccans who have cryptocurrencies or users of the FTX platform? Some have seen their portfolios shrink following the drop in prices, others have lost their assets altogether. If the number of Moroccans using this platform is unknown, our expert tells us that the marketplace met with a favorable response locally.

“You should know that FTX is widely used in Morocco contrary to what many people think. This comes from the fact that the model of this company is based on the optimization of transaction costs. This is what has brought a meteoric rise, but also its fall.In the world of cryptocurrencies, each transaction carried out, whether it is an exchange of one crypto for another or a crypto for currency money, the platform takes a commission “, explains Badr Bellaj. On FTX, these commissions were lower than those of competitors like Binance for example.

Investors already experienced in cryptocurrencies in Morocco, who stored and traded on FTX, therefore lost everything. But, for our interlocutor, this risk was known. “It’s a target that’s used to losing as well as winning. It’s a very volatile world. Bitcoin has lost over 60% year-to-date and yet there’s no direct impact on the Moroccan population using cryptocurrencies. The only thing we can expect is maybe an exit of their bitcoins to ‘cold walletsi.e. outside of these trading platforms in case another platform goes down.”

It is also important to remember that for Moroccan investors who have lost their money on the FTX platform, it is almost impossible to appeal for compensation or reimbursement. “Investments are risks by definition and currently it is difficult if not impossible for investors around the world and particularly in Morocco to initiate legal proceedings to obtain compensation. FTX has declared bankruptcy and has not liquidity, so any investment is lost,” he concludes.

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