Crypto contagion isn't over and the lack of transparency means the industry is an 'insider's game,' EY blockchain chief says

• FTX's collapse shows that crypto contagion isn't over and the industry has transparency issues, according to EY's blockchain chief Paul Brody.
• Brody noted that transparency claims made by crypto firms were often "difficult to test," which makes the industry an "insider's game."

FTX's collapse shows that crypto contagion isn't over, and the lack of transparency in the industry means crypto is an "insider's game," according to EY's head of blockchain Paul Brody.

"We're definitely not done with the contagion," Brody said in an interview with CNBC on Tuesday. "People said, crypto is going to be better because it's going to be transparent and there's no politically motivated central bank in this ecosystem. It's turned out to be quite the opposite. Crypto is extremely non-transparent."

That's been exposed with the collapse of prominent crypto firms this year, with companies like Terra Luna and Sam Bankman-Fried's FTX declaring bankruptcy, setting off a domino effect of other collapses in the industry.

FTX's bankruptcy, in particular, revealed chaotic record-keeping within the crypto exchange and extravagant purchases using company funds, rattling the trust of its former users.

But the problem is deeper than just bad actors in the industry, Brody said. Users often don't have the ability to fully evaluate crypto firms for themselves, even when businesses are transparent with their algorithm. He noted that his own team finds transparency claims among crypto firms "difficult to test and follow through."

"In some cases, that's absolutely by design," he said. "You follow all the rules, but the rules are complicated, and so therefore it's an insider's game."

Brody predicted customers would start to look to firms in the space that they could trust and were inspected by regulators, adding to a chorus of market commentators who have urged government agencies to tighten the screws on crypto firms. Lawmakers have been critical of the SEC's current approach, which asks crypto firms to "come in and talk" to be regulated.