FTX crash risks triggering too strict rules for fintech, warns Klarna boss

The head of “buy now, pay later” (BNPL) firm Klarna says he fears the implosion of FTX will lead to an overly harsh regulatory crackdown on the fintech sector.

Sebastian Siemiatkowski warned that stricter rules would make it harder to compete with traditional lenders and give consumers less choice.

He claimed that the “pretty scary” collapse of cryptocurrency exchange FTX would be used by the “traditional banking industry… to once again regulate this industry to the detriment of consumers”.

“We need more competition in the banking industry, we need good consumer protection laws, but that doesn’t stifle competition,” he told Bloomberg on Monday.

“I’m a little concerned that these debacles that we’ve seen again will hamper that and continue to prolong the excessive profitability that we’ve seen in the banking industry.”

Klarna and other BNPL firms already face tougher rules in the UK after campaigners and watchdogs warned the new form of lending risked pushing more people into debt.

The fast-growing sector, which is particularly popular with younger shoppers, has raised concerns that BNPL offers could leave people with large debts they can’t afford.

Under changes announced by the Treasury, lenders will have to carry out affordability assessments before offering customers payment-sharing plans from next year.

Companies will also for the first time be under the supervision of the Norwegian Financial Supervisory Authority, and customers will have the right to lodge complaints with the Financial Ombudsman Service.

Siemiatkowski’s comments came as the cryptocurrency industry braced for possible “contagion” spreading from FTX to other businesses.

FTX filed for bankruptcy after a liquidity crisis left the crypto exchange unable to meet customer demands for withdrawals worth billions of dollars.

In bankruptcy filings, the company disclosed that it has more than 100,000 creditors.

John Ray, the liquidator who returned billions to Enron’s creditors after the utility’s 2001 collapse, has been appointed to oversee FTX’s affairs.

However, Changpeng Zhao, the billionaire founder of rival exchange Binance, has warned that the fallout from FTX’s collapse could trigger further business failures in the crypto industry.

He said “cascading effects” risked triggering the crypto equivalent of the 2008 financial crisis.