Renowned writer Professor Li Jiatong poses three questions to FTX, criticizing the cryptocurrency causing chaos.

Professor Li Jiatong is a well-known scholar and writer in Taiwan, having published numerous works. He also places great emphasis on education and frequently comments on current affairs.

Today, Professor Li commented on the recent FTX incident and the chaos caused by cryptocurrency in a post titled "The Chaos Caused by Cryptocurrency" on Facebook. However, he emphasized that he is not an expert, but rather aims to spark discussions among more experts through his article, in order to help the public better understand cryptocurrency.

He first explained Bitcoin:

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1. Bitcoin is obtained through mining by solving mathematical problems to earn Bitcoin.
2. The amount owned by individuals is recorded on the blockchain, which is a ledger maintained collectively by everyone and cannot be tampered with.
3. The value of Bitcoin comes from its scarcity due to total supply limitations.
4. Bitcoin is not a currency.
5. Bitcoin mining consumes a significant amount of electricity, which is harmful to humans.
6. The price of Bitcoin is easily influenced by speculation.

He also criticized FTX.

He believes that FTX is not just a pure cryptocurrency exchange, as FTX also issues FTT tokens similar to stocks, profiting from speculation, which results in FTX's astonishing profits. Additionally, FTX moved investors' money to Alameda. After the incident was exposed, there was a run on users. Since FTX itself is a Ponzi scheme, it could not withstand the run and collapsed, causing FTT to plummet as well.

Three Questions on Cryptocurrency

Professor Li raised three questions:

1. Any major company should have its accounts audited by an accounting firm, which should be able to detect if FTX company misappropriates investors' funds. Why isn't there an accounting firm auditing?
2. FTX issuing FTT is similar to a company issuing stocks. In Taiwan, issuing stocks requires approval from the stock exchange. Why can FTX company issue FTT freely?
3. In the United States, which government agency regulates FTX company?

Basic Answers for Cryptocurrency Novices

There is currently no definitive answer to the first question. However, FTX is not a publicly listed company, and although companies usually undergo audits by accountants, since it is not a publicly listed company, it does not need to submit reports, and the role of the accountant here is more like general record-keeping and advisory.

The second point is relatively simple. Currently, regulatory authorities have not reached a consensus on whether token issuance constitutes securities. In Taiwan, for example, cryptocurrencies are classified as virtual currencies, divided into securities tokens (ST) and utility tokens (UT). Therefore, until a consensus is reached, unless the issuer voluntarily applies for regulation, problems usually arise or when there is fundraising activity that catches the attention of regulatory agencies.

Finally, FTX is not a U.S. company; it is registered in the Bahamas and is regulated by the Bahamas Stock Exchange. FTX US, on the other hand, is a U.S. company with multiple subsidiaries, regulated by both the SEC and CFTC.

Professor's Five Conclusions

Professor Li is not convinced by this disruptive new technology. He believes that technology should not cause such chaos. Overall, he is extremely dissatisfied with cryptocurrency for five main reasons:

1. Currency issuance should be the responsibility of the central bank. How can individuals issue any currency? The idea of cryptocurrency itself is flawed.
2. Cryptocurrency claims to be decentralized, yet it has spawned exchanges. How can cryptocurrency be considered decentralized?
3. Cryptocurrency is created out of thin air, with no positive impact on economic development, only causing chaos.
4. Cryptocurrency allows people to get rich without effort but consumes a significant amount of energy.
5. The sole function of cryptocurrency is to facilitate money laundering by criminal organizations.