EXCLUSIVE: FTX CEO Sam Bankman-Fried On Regulation, Tokenization, Building 'A Global Liquidity Venue'

One would think that a deep passion for something as nuanced as blockchain and cryptocurrency would be requisite for success in such space.

That’s not really the case, according to Sam Bankman-Fried, the 29-year-old billionaire co-founder of FTX and Alameda Research.

Bankman-Fried’s drive for success is a derivative of his philosophy of “earning to give,” according to his recent conversation with Forbes. If there was another way to earn more money to give and make a bigger impact, the crypto pioneer said he would pursue that instead. 

For the time being, the prevailing financial system is a worthy pursuit, he said. Opacity and tight control, as well as intermediation, are dynamics that make it so that over 10% of New Yorkers have no access to checking and savings accounts.

With no one place to aggregate and manage wealth, it’s difficult to live a financially fit lifestyle. Given that, Bankman-Fried said he's on a mission to lower barriers to emerging financial ecosystems.

His endeavor to impact and pass on wealth has attracted the likes of businessman Kevin O’Leary, an investor, and spokesperson for FTX.

In learning more about Bankman-Fried’s motives to innovate to impact, read on.

A Short Story On Bankman-Fried: An MIT physics alumnus, Bankman-Fried’s foray into finance started at quantitative trading firm and liquidity provider Jane Street.

While at Jane Street, Bankman-Fried spotted opportunities in an emerging finance ecosystem: increased demand for cryptocurrencies across markets, resulted in premiums to spot. In 2017, he founded crypto research and trading firm Alameda Research.

There, he and others extracted premiums to spot cryptocurrency via arbitrage, buying Bitcoin BTC/USD domestically, for instance, and sending it to foreign exchanges to sell at higher prices, all before converting and wiring back funds.

​​“You do have to put together this incredibly sophisticated global corporate framework in order to be able to actually do this trade,” Bankman-Fried said in one conversation. “That’s the real task, the real hard part.”

The Birth Of FTX: In light of frustrations with the compliance and infrastructure at prevailing cryptocurrency exchanges, Bankman-Fried founded FTX.com and FTX.US parent FTX Trading Ltd., which recently secured more than $420 million in funding.

The firm’s explosion in popularity came with its catering to institutional interests.

“If you’re being compliant internally and also with regulators in each jurisdiction you operate in, you don’t have the option to be off-sides,” O’Leary said in a recent Benzinga interview. “FTX has the largest infrastructure and best compliant platform an institution’s … internal compliance department can work with and external auditors can audit.”

In now being a top-five exchange, FTX is actively acquiring, integrating and innovating.

Recent purchases include Blockfolio and LedgerX, as well as the launch of a NFT marketplace and focused marketing initiatives like the $135-million renaming of the Miami Heat's home arena.

A Focus: Transparency.

In early December, Bankman-Fried testified to Congress on crypto regulations.

“That was only the first step,” he told Benzinga on Congress’ intent to get up to speed. “I’m optimistic that the regulatory framework in the United States, and other places, will end up being workable from both sort of industry side, but also from the context of meeting consumer protections that don’t exist in some places, today.”

With regulators and the industry working in tandem, Bankman-Fried sees innovation benefiting.

“I was really heartened by the reception of the hearing, … [and] I think that there are straightforward ways to create a framework that will work for important stakeholders.”

Lead By Example: FTX is leading the conversation on market structure and data.

“Market data is incredibly messy,” he explained. “Most people, when they want to trade in equity, they go through 10 to 20 intermediaries. With every layer is another round of fees.”

Traditional intermediation and obscurity are minute given free access to FTX market data; traders, at the lowest rungs, are afforded the same access sophisticated firms may receive.

Additionally, in line with key principles FTX issued as part of Bankman-Fried’s written commentary to his in-person Congressional testimony, there is nonstop trading access.

“24/7 allows people to access markets directly because that’s how crypto markets have developed,” Bankman-Fried said in a comment on tokenizing shares of companies like WonderFi Technologies WNDR.

“Users can get full market data on the markets they’re trading and it also means they can potentially take better control of their own finances; they can manage the custody and transferring themselves, of their assets, by moving them as tokens.”

On the potential risks of tokenization and 24/7 trade, Bankman-Fried said that users of FTX have the same risk to the underlying they would at any other brokerage.

“It is the case that markets are sometimes illiquid, and that is particularly true if you’re not accessing through the deepest liquidity pool,” he said in there being less liquidity, potentially, during off-market hours. “At 11 p.m. there may be less liquidity than there would be at 2 p.m.”

2022 And Beyond: In improving liquidity and providing a robust institutional and retail offer, FTX sees it as necessary to be licensed in as many jurisdictions for a number of activities like offering futures and options.

“If you look longer down the road, we would absolutely like to get involved in other asset classes, and to become a global liquidity venue across the board.”

Additionally, FTX is looking to spread its message and make an impact on more lives. Marketing is one way of accomplishing this, Bankman-Fried added: “It helps people know who we are and form the basis of where our brand starts from going forward.”

Another way is direct contributions to initiatives that help level the playing field in aspects beyond finance, and pass on wealth to better society, at large.

“We’ve seen that the world is not ready for a global pandemic, and the next one could be worse than this one. I’ve been most excited about giving to groups looking to try to mitigate the impact of future pandemics, or prevent them altogether.”