The real extent of the consequences on the crypto ecosystem of the earthquake caused by the FTX bankruptcy is still far from being known: its more or less distant aftershocks could still lead to other difficulties in chain. However, the scale of the disaster and its relatively systemic nature should lead us to draw some initial lessons.

The first, obvious one, is the urgent need for a real international regulation and the exit of the denial shown by a part of the crypto ecosystem. Of course, the FTX wreck is not the wreck of crypto-currencies as such but the wreck of an intermediary. But there is too often, behind this argument, the desire not to question the libertarian underpinnings and the "institutional allergy" deeply rooted in the DNA of the ecosystem. And for good reason, the failure of FTX is not only that of SBF and its affiliates, it is also the systemic consequence of the lack of regulation of the sector.

>>> FTX: the figures of a historic fall

It is striking to note, in this respect, to what extent many of the Web3 promoters' rhetoric echoes the mantras of Web 2.0, in a form of collective amnesia. We find in the concepts of network state or decentralized and self-organized communities the same libertarian underpinnings as those who had promoted through the emergence of the web the participation of all, the wisdom of crowds or the end of hierarchies. We know what happened: in a dialectic characteristic of Silicon Valley, this self-regulating crypto-hippie illusion allowed the emergence of an economic and democratic power concentrated as never before in the hands of private companies, the explosion of online hatred or fake news... and in fine reminded us of the indispensable character of regulation and its institutional corollary. In the same way, the Web3 has experienced this evolution in an accelerated way (and in a more confidential way, both in terms of sector - finance - and in terms of diffusion, as it has not reached the general public). 

Until the present situation. The merit of this situation is that it reminds us that finance is based on trust, and that trust is based on the underlying assets (and their protocols, whether it is the dollar or bitcoin), but also on the actors, whose regulatory framework is not the least important of their attributes. Whether they are governments, central banks, banks or other financial intermediaries, these actors are credible because they are regulated according to imperfect standards that are accepted, if not known, by all. 

‍Lastbut not least, these actors and rules have democratic legitimacy. During my years in government, one of the leaders of the Diem (ex-Libra) project had presented me with the value of this by stating that it was not normal to not be able to transfer one's money frictionlessly from one country to another. This assertion is questionable, to say the least. That the current functioning of the financial system creates rents for certain intermediaries during international transfers is probable (thanks to fintechs); that the solution is to create a transnational para-currency governed by a private company is the negation of democratic sovereignty. This is what I had caricaturally summarized during my years as a minister by the formula "a currency goes with a parliament and an army". Let us remember that the primary role of Parliament is to vote the budget, and that monetary matters are an attribute of the economic - and therefore strategic - sovereignty of a country.

However, it seems essential not to throw the baby out with the bathwater. In a time that leaves little room for nuance, it would be surprising if the chain of tribulations of several important actors did not feed the cryptophobia of a part of the political and media sphere. This would be a mistake. First, because the FTX affair has little to do with crypto-assets themselves, their interest or the questions they may raise. On the contrary, it is a terribly classic case, a form of "Enron" scandal squared or cubed, where what is being questioned is not the underlying asset but the practices of one (or several, even) intermediary(s).

Secondly, because blockchain and crypto technologies represent a considerable potential for innovation. By guaranteeing the authenticity of exchange registers and disintermediating part of them, they compensate for some of the trust flaws inherent to the functioning of the Web as we know it and could significantly improve the lean character of many historically very inefficient (in finance or legal, for example) - and therefore expensive - processes.

Will we, however, reach the famous Web3, that is to say a revolution of a large part of the Web, thanks to the generalization of this trust overlay? The author of these lines is allowed to think that this is still very uncertain. For this to happen, it will be necessary to meet several significant challenges, the first of which are their energy consumption, their capacity to ensure millions of transactions in real time, and their interactions with the good old Web 2.0 players, who have a strong tendency to centralize and do not have the same intrinsic security.

But these technical imperfections of current technologies and other uncertainties should not lead us to hasty conclusions: it would be counterproductive to deprive ourselves of their potential in terms of confidence, efficiency and of course job creation. Worse, Europe would be shooting itself in the foot once again if it missed a new technological wagon, even though it has the assets to be a leader!

>>> Sorare: "You have to be agile on regulation

In short, what we are witnessing is a very classical dialectic of innovation. To emerge, innovation needs to break the rules and get off the beaten track - and out of the norm. In order to develop and to get out of the insiders' circles, it needs trust, therefore rules (on the largest possible territory) and frameworks. It is up to the legislator to find the right balance in order to create the conditions for this trust without preventing innovation from emerging and spreading. 

This dialectic, although essential, is far from obvious. This is all the more true when it comes to cryptos, which present a particular difficulty for regulators: that of mixing a financial underlying in addition to the blockchain technologies used (first and foremost Ethereum) with applications that have nothing to do with finance (whether smart contracts or digital art), creating cross-interactions between historically separate regulatory fields.

The various regulators, from the French government (PACTE law) to the European institutions (MICA), the ACPR, the AMF and recently the ANJ on the Sorare case, have taken many steps in this direction. But this progress is still largely insufficient. We will necessarily have to go much further in adapting our regulatory frameworks and their implementation - probably by introducing asymmetrical regulation between emerging and established players, and certainly by ensuring its effective and uniform implementation on the European territory. In this case, the crypto world will gain nothing by opposing it head-on, or by relocating to Dubai to try to escape it. To grow, it needs this regulation.