Leading US lawmakers took action due to the dramatic collapse of crypto exchange FTX. The FTX crisis has led to increased invitations for more regulation and faster legislative action. Here are the statements of the US senators on the matter…
FTX collapse moves US senators
Koindeks.com As we also reported, FTX CEO Sam Bankman-Fried announced earlier this week that there was a “liquidity shortage” in his stock market. Subsequent reports suggested that FTX was bringing in client funds with Alameda Research, another company founded by Bankman-Fried. Currently, FTX has a deficit of approximately $10 billion and has frozen withdrawals on its exchange. FTX US, the US arm of the exchange, warned that it could freeze trading in the coming days, as a precedent.
Some U.S. lawmakers, on the other hand, issued statements that voiced their apprehension about the situation. Senator Sherrod Brown, who chairs the Senate Banking Committee, said in a statement:
The recent collapse of FTX is a loud warning that cryptocurrencies can fail, and just as we’ve seen with OTC derivatives that sparked a financial crisis, these failures could have a ripple effect on consumers and other parts of our financial asset system. The ongoing chaos of the crypto market is causing us to think carefully about how to regulate cryptocurrencies and their role in our economy. It is invaluable for our financial watchers to investigate what led to the collapse of FTX so we can fully understand the abuses that occurred. I will continue to work to hold the evil players in the crypto markets accountable. I am determined to find the most adequate way forward to protect consumers and the stability of the US markets and banking system.
Senators drew attention to regulatory shortcomings
Senator Patrick Toomey, a senior member of the Senate Banking Committee, touched on the issue in a tweet. Toomey said, “The crypto division operates with a lot of uncertainty. This is because regulators refuse to provide clear guidance. In addition, lawmakers refuse to take action,” he said.
On the other hand, Maxine Waters, who chairs the House of Representatives Financial Services Committee, said in a statement:
The recent crash of FTX.com is the latest in a series of events that include the collapse of cryptocurrency companies and the impact these failures have on consumers and investors. Although the US arm of FTX is reportedly operational, FTX’s FTT tokens are now free of charge and, worse yet, FTX.com customers cannot access their funds. It is clear that cryptocurrencies operating without strong federal oversight and custody have valuable implications. For four years, under my leadership, the Financial Services Committee has spearheaded the study and research of the cryptocurrency market. […] This week’s news further highlights the urgent need for legislation.
Patrick McHenry: I look forward to learning more from FTX and Binance
Patrick McHenry, a senior member of the House Financial Services Committee, said in a statement:
For years I have advocated for Congress to develop a clear regulatory framework for the crypto-asset ecosystem, including trading platforms. Recent events demonstrate the need for Congressional action. It is essential that Congress create a framework that allows for the development of innovation in the United States while ensuring that citizens have adequate containment. I look forward to learning more from FTX and Binance about the steps they will take to protect customers in the coming days.
Senator John Boozman, senior member of the Senate Agriculture Committee, said in a statement:
Events this week reinforce the need for greater federal oversight of the crypto-asset industry. This has been our aim since we started drafting the Digital Commodity Consumer Protection Act 2022. Working closely with our colleagues, financial regulators, academics and a wide range of departmental associates, we have introduced a robust bill that aims to bring transparency and accountability to the people. As our legislative work continues, the CFTC actually has the ability to regulate manipulation and abuse. I strongly recommend that they actively use these powers when necessary.
Cryptocurrency pro Cynthia Lummis also made a statement
Senator Cynthia Lummis, who is known for her positive attitude towards cryptocurrencies and is on the Senate Banking Committee, said in a statement:
Recent events occurring midway between FTX and Binance are the clearest example of why we need clear rules for crypto asset exchanges in the US. Market manipulation, lending activity, and whether client funds and assets are properly protected are just some of the many issues that my colleagues and I will need to consider in the coming days. The transparent and fair exchange regulation provided in the Lummis-Gillibrand Responsible Financial Innovation Act is invaluable to ensuring that customers are protected while continuing to foster responsible innovation.
Warren’s tweet drew backlash
“The collapse of one of the biggest crypto platforms shows just how “scammy” the industry is,” said Senator Elizabeth Warren, who sits on the Senate Banking Committee. He said he would continue to push the U.S. Securities and Exchange Commission (SEC) to pursue the matter.
Warren’s tweet, in particular, caused reflection from many crypto executives, including Coinbase CEO Brian Armstrong. Armstrong has been saying for some time that US regulators are pushing crypto traders out of the field by not providing clear rules for companies to follow. Meanwhile, SEC Leader Gary Gensler has said on numerous occasions that he believes crypto exchanges should register as national securities exchanges.