DDemocratic lawmakers and officials are calling for more cryptocurrency regulations after one of the world’s largest exchanges teetered on the brink of collapse.
Crypto critics are ramping up pressure for new rules following the apparent collapse of exchange FTX, which is facing a massive loss of confidence amid reports of fraudulent behavior and wants to be acquired to reassure customers and investors that they’re getting their money’s back. His struggles have caused the crypto market to plummet in value and led to government investigations.
CRYPTO BLOODBAD: BITCOIN DROPS TO TWO-YEAR LOW AMONG DOUBTS TO MAJOR EXCHANGE
“The collapse of one of the largest crypto platforms shows how much of the industry seems to be made up of fog and mirrors,” Sen. Elizabeth Warren (D-MA) tweeted Wednesday. “We need more aggressive enforcement and I will continue to push to enforce the law to protect consumers and financial stability.”
Other Democrats called for legislation. “Today, it is clearer than ever that there are serious consequences for cryptocurrency companies operating without robust federal oversight and customer protections,” Maxine Waters (D-CA), chair of the House Financial Services Committee, said in a statement Thursday. Waters noted that she has been working on legislation to regulate the industry and that developments over the past week “underscore the urgent need for legislation.”
Waters legislation would create a fintech task force and create a federal framework that would establish safeguards for trading in stablecoins, digital currencies that have value based on fixed assets.
“It is critical that our financial regulators investigate what led to the collapse of FTX so that we can fully understand the wrongdoing and abuse that took place,” Senate Banking Committee Chair Sherrod Brown (D-OH) said. , in a statement. “I will continue to work with them to hold bad actors in the crypto markets accountable. I am committed to finding the best way forward to protect consumers and the stability of the US markets and banking system.”
The Securities and Exchange Commission and the Department of Justice are coordinating to deal with the aftermath of FTX’s collapse. The company was set to be acquired by Binance on Monday, only for Binance to pull out after FTX founder Sam Bankman-Fried withheld the company’s US operations from the acquisition. The deal prompted FTX to freeze withdrawals from the platform.
Crypto investors need better protections in a “materially noncompliant” space, SEC Chairman Gary Gensler told CNBC.
“The runway is phasing out. Investors around the world are getting hurt,” Gensler added. The SEC chairman has long argued that more crypto assets should be considered securities, meaning they would be regulated by the agency. Bankman-Fried, the Democrats’ second-largest donor over the past year, has been pushing for new regulations.
Crypto industry leaders have said that lawmakers have an equal role to play in the failure of FTX. The reason for the offshore exchange’s failure was that “the SEC’s failure to provide regulatory clarity here in the US has resulted in many American investors (and 95% of trading activity) going overseas.” argued Coinbase CEO Brian Armstrong. Other CEOs were quick to echo Armstrong’s comments, noting that a lack of rules has made the US less attractive than Singapore, which has regulations on crypto.
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The fallout from the end of the FTX-Binance deal has had an adverse impact on the crypto market. Bitcoin was down 17% on Wednesday compared to the previous day. Ethereum, the second largest cryptocurrency by market cap, lost more than 25% of its value on Wednesday.