The precipitous demise of cryptocurrency platform FTX has made it imperative for Congress to take action in the digital asset industry, but the bill has done little to foster consensus on what it should do or how far it should go. did.
If there is no consensus, The End of the World’s Second Largest Cryptocurrency Exchange It just made existing factions dig deeper.
Industry proponents are redoubled efforts to give cryptocurrency companies similar rights to banks, while skeptics are calling for the eradication of all cryptocurrency activity. Aaron Klein, a senior fellow in economic research at the Brookings Institution, said the middle class still supports some form of regulation, but for the most part has not decided what it should look like. Stated.
“Each of the three sides has seen something in the fall of FTX that strengthens their previous,” said Klein. “The left-wing precedent was that cryptocurrencies create limited value and are a fraud. The right-wing precedent is that regulation cannot stop it, so we need a more decentralized system.” The middle one is that cryptocurrencies are becoming really important and more regulation will hinder attackers FTX getting this big and scamming what looks like billions of dollars to people It’s the same as doing
Much of the debate around crypto regulation centers around whether and to what extent that industry participants and products can engage in a regulated banking system.
one suggestion floating in the summer Senators Cynthia Ramis (Republican Wyoming) and Senator Kirsten Gillibrand (Democratic New York) will make it easier for certain digital asset banks to access Federal Reserve accounts.It’s a controversial topic.Custodia Bank — Wyoming’s chartered depository and digital asset management bank — is sue the Federal Reserve Board Access to so-called master accounts.
Banking advocates are not happy with the idea of granting master accounts to groups dealing in cryptocurrencies and other digital assets. Shortly after the FTX collapse, the Banking Policy Institute said keeping such groups out of the regulated banking system could prevent more severe consequences from the incident.
“Lesson learned: Don’t bail out a failing industry by granting access to Fed accounts and offering new business models that will link it to the regulated financial system and help the next Cryptoverse crisis. It raises the risk that it could actually undermine financial stability,” BPI said on Twitter.
FTX, once valued at $32 billion, filed for bankruptcy late last week after being embroiled in a self-trading scandal involving trading firm Alameda Research. The discovery that Alameda was holding a large amount of his FTX’s internal token, his FTT, led to an outflow of $6 billion of his funds to the banks and a transfer to rival exchange Binance. The sale failed, creating a liquidity crisis. According to Bloomberg and other media outlets, more than $1 billion in depositor funds were lost during the ordeal, making it likely the biggest collapse to date in the cryptocurrency industry.
FTX’s size, plus the strong ties company founder Sam Bankman-Fried has forged with regulators and lawmakers, could amplify the impact of the company’s failure and the scandal that surrounds it.
“FTX CEO Sam Bankman-Fried has been hailed as one of the industry’s leading voices, and politicians on both sides of the aisle have happily embraced him and accepted his grace. BTIG, a financial services company, wrote in an analytical brief. “These policy makers feel betrayed by humans and burned to the digital asset ecosystem. It’s happening.”
Bankman-Fried testified before the House Financial Services Committee last December and appeared before the Senate Agriculture Committee twice earlier this year. The Agriculture Commission oversees the Commodity Futures Trading Commission, which oversees cryptocurrency exchanges. FTX is registered and licensed with the CFTC and until last Friday was looking to register its subsidiary, LedgerX, as a derivatives clearing house.
Bankman-Fried is considered a prominent figure in the cryptocurrency market because of his philanthropic work, and was consulted by many lawmakers when drafting regulatory proposals for the industry. Now everything he touches is “politically radioactive,” Boltanski said.
One such bill is the Digital Goods Consumer Protection Act, drafted by Michigan Democratic Senator Debbie Stabenow and Ark Republican Senator John Boozman. The bill hasn’t been withdrawn, but senators are reconsidering it because of FTX’s demise.
“In light of these developments, we are conducting a top-down investigation to ensure we have the necessary safeguards so desperately needed by the digital commodities market,” Boozman said in a statement.
Klein said it was an appropriate response given what happened in the past two weeks.
“In the wake of FTX, everyone should fundamentally rethink the proposal,” he said. Everyone should be equally sober that the guy who came to FTX is the same guy who ran Enron and he said FTX everything he’s ever seen It should scare everyone and make them stop and think again.
But not everyone is taking that route. Both Lummis and Gillibrand support their proposals as well-equipped at this point, arguing that they could have prevented the type of failure seen in FTX.
“Undoubtedly, digital assets will continue to play a role in the financial system, which is why we need to move forward with the Lumis Gillibrand Responsible Financial Innovation Act,” Lumis said in a statement. “The bottom line is that comprehensive regulation needs to be put in place to keep the bad guys out and ensure that consumers can trust the institutions they trust with their hard-earned money. Lummis-Gillibrand. is the best all-encompassing option we are considering, balancing consumer protection and innovation.”
Lumis and Gillibrand also began working with Sen. Pat Toomey of Pennsylvania (the Republican leader on the Senate Banking Committee) on a bill focused exclusively on stablecoins. It is unclear if that bill has a master account her component. Representatives for all three senators did not immediately respond when asked for comment on Friday afternoon.
The Lummis-Gillibrand bill, which was announced in the summer, hasn’t had a hearing or been marked up before the Senate Banking Committee, nor has any other digital asset-related bill. Both would have to happen before legislation could move forward and be signed into law.
Senator Sherrod Brown (D, Ohio), chairman of the Senate Banking Committee, is keen to dig into the facts of the FTX collapse and the collapse of other digital asset companies such as Voyager and Celsius, a spokesperson said. A representative told American Banker. Brown said he hopes to call a public hearing on the matter soon, he added.
In terms of policy responses, Brown supports regulation of the cryptocurrency industry, but is not settling for any particular approach.
“I have always focused on fraud, fraud, volatility and outright theft in the crypto industry,” Brown said in a statement. It proves why we need a comprehensive regulatory approach to protect our economy from cryptocurrency risks.”