The collapse of cryptocurrency exchange FTX did more than rattle markets this week. It grabbed the attention of several U.S. lawmakers who used the resulting pandemonium as evidence that stricter regulation of the crypto industry is needed.
Numerous officials expressed concerns about the state of the industry and how investors are being harmed, especially those that were impacted by the swift shuttering of FTX. Many asserted that a regulatory framework for crypto is urgently needed.
Early in the tumult, when it seemed possible that FTX may be acquired by Binance, Congressman Patrick McHenry (R-NC)—the top Republican on the House Financial Services Committee—released a statement on Tuesday, highlighting the need for regulation.
“The recent events show the necessity of Congressional action,” he wrote in a press release. “It’s imperative that Congress establish a framework that ensures Americans have adequate protections.”
Maxine Waters (D-CA), chairwoman of the House Financial Services Committee, shared similar concerns about the industry on Thursday, suggesting that federal regulation could’ve prevented investors from being harmed to the degree that they were.
“Now more than ever, it is clear that there are major consequences when cryptocurrency entities operate without robust federal oversight and protections for customers,” she stated.
U.S. Senator Sherrod Brown (D-OH), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, said that it is crucial financial watchdogs study the collapse of FTX in order to understand how investors’ funds were mistreated.
“The recent collapse of FTX is a loud warning bell that cryptocurrencies can fail,” he stated. “The cryptocurrency market’s continued turmoil is why we must think carefully about how to regulate cryptocurrencies and their role in our economy.”
The implosion of FTX must be a wake up call for Congress and financial regulators to hold this industry and its executives accountable.
Too much of the crypto industry is smoke and mirrors. It’s time for stronger rules and stronger enforcement to protect ordinary people.
Congressman Brad Sherman, chairman of the Subcommittee on Investor Protection and Capital Markets, said a lack of regulatory clarity—created in part by the Securities and Exchange Commission—was a key reason the situation surrounding FTX was so calamitous.
“It is important now more than ever that the SEC take decisive action to put an end to the regulatory gray area in which the crypto industry has operated,” he wrote in a statement. “To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective.”
Finally, Senator Patrick Toomey (R-PA), who has also criticized the regulatory approach of the SEC for leaning heavily on enforcement, also called on the need for a clear regulatory framework.
“This episode underscores the need for a sensible regulatory regime that, among other things, ensures a centralized exchange segregates and safeguards customer assets,” he stated in a Tweet.
This episode underscores the need for a sensible regulatory regime that, among other things, ensures a centralized exchange segregates and safeguards customer assets.