The prospect of a financial scenario that will put the FTX Trading scandal in the shade is what keeps him up at night, a panellist told attendees at the World Federation of Exchanges annual meeting at the Hamilton Princess & Beach Club.

Lawyer Paul Leder is counsel at the Washington firm of Miller & Chevalier Chartered and a former director of the US Securities and Exchange Commission’s Office of International Affairs.

Responding to a question from the audience, he said: “In retrospect, in 2022 FTX, all these different companies, it was like the flavour of the month.

“It was the fear of missing out, it was ‘it must be the thing’ – and it turned out as a collective delusion where the guardrails that are supposed to be in place, didn’t work.

“The registration of the US entities exchange – that didn’t work, didn’t do anything. The vetting by VC [venture capital] and PE [private equity] firms that supposedly occurs didn’t work and people were just throwing money at it as they have any number of other companies.”

He added: “That next collective delusion will be worse. Yes, people lost money and I am sure individuals’ lives were adversely affected by it [the FTX failure], but everything else kept going.

“There will be other things that we get caught up in – our “tulip moment” – that will be far worse.”

Mr Leder appeared on the panel “How to Ensure Markets Have Integrity – An Ecosystem Approach”.

He was joined by technologist Tom Skinner, founder and managing director of Dublin-headquartered pTools Software, and Eric Noll, the chief executive of Pennsylvania’s Stone Ridge Capital Partners, who is starting his second term as chairman of the board of governors of Finra, the self-regulatory organisation that regulates broker/dealers in the United States.

Mr Noll said he was speaking from a US perspective and in his personal capacity.

“What really keeps me awake is I look at what happened in 2008 and 2009. The generation of that economic crisis or market crisis was not due to a failure of an exchange or technology brittleness. But one of the things that came out of that was a deep-seated fear of a frozen marketplace.”

He added: “I talked earlier about how one of the keys for a market is risk transfers to people who want it from people who don’t want it – and one of the key aspects of 2008-2009 was that just didn’t happen.

“The world froze and I, for one, was a little scared about what was going to happen next. Luckily, we’ve managed to work through that.

“Those are the things, the kind of events, that I worry about – whether they’re technology-driven or whether they’re larger economic-driven – get in the way from my perspective.”

Mr Skinner said: “From a technology perspective, there’s a sense in which the losses on crypto and the FTX events, in comparison to 2008-09, are minuscule.

“But I would be aware of the potential for new technologies and also a disconnect between larger markets and smaller markets, combined with technologies, to create an opportunity for a scale of losses that is very, very significant as a result of the technological impact of AI on how people trade and how they do business.”

The panel was chaired by Greg Wojciechowski, president and chief executive officer of the Bermuda Stock Exchange.

The 62nd annual meeting of the WFE, which was hosted by the BSX for the first time, attracted 250 registered delegates from 50 countries.

The 2024 event will be held in Kuala Lumpur, Malaysia.