US lawmakers don’t need to reinvent the wheel as they consider legislation after the collapse of Sam Bankman-Fried’s FTX crypto empire, the head of the Senate Banking Committee said.
(Bloomberg) — US lawmakers don’t need to reinvent the wheel as they consider legislation after the collapse of Sam Bankman-Fried’s FTX crypto empire, the head of the Senate Banking Committee said.
The panel’s hearing on Wednesday is the second this week by Congress to scrutinize the fallout of FTX’s bankruptcy. The company imploded in November, sending shock waves across the industry and fanning criticism of Washington’s weak oversight. Bankman-Fried was arrested in the Bahamas on Monday after the US government filed criminal charges amid multiple probes into his possible misconduct.
“If we are going to learn from FTX’s meltdown, we must look closely at the risks from conflicts at crypto platforms that combine multiple functions,” said Sherrod Brown, the committee’s chairman. “It means thinking about the kinds of disclosure that consumers and investors really need to understand how a token or crypto platform works.”
Brown said in remarks before the hearing that lawmakers can look at existing banking and securities laws for time-tested approaches as a way of overseeing crypto businesses.
Separately, senators Elizabeth Warren, a Democrat, and Republican Roger Marshall said Wednesday they are introducing a bill to address the national-security risks posed by cryptocurrencies and other digital assets. The proposed legislation would close loopholes in anti-money-laundering rules and help counter terrorism financing, they said in a statement.
“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers and for rogue states that want to launder money,” Warren said at the Senate hearing.
Crypto Industry
Other policymakers pushed back on the harsh criticisms levied against crypto, saying the entire industry shouldn’t be punished for the alleged crimes of Bankman-Fried and his companies.
The panel’s top Republican, Pat Toomey, asked colleagues to separate that potentially fraudulent activity from the legitimate innovations in the digital-asset markets. “The code committed no crime,” he said.
Republican Senator Cynthia Lummis underscored Toomey’s point.
“Digital assets are not on trial. Fraud and organizations are on trial,” she said. Lummis and Senator Kirsten Gillibrand, a Democrat from New York, plan to reintroduce their wide-ranging bill next year to overhaul how the digital-asset industry is regulated.
Neither John J. Ray III, FTX’s current chief executive officer, nor Bankman-Fried were scheduled to participate in Wednesday’s hearing. Charges against Bankman-Fried were unsealed Tuesday and include wire fraud for allegedly misusing billions of dollars in customers’ funds.
The Senate committee’s witness list includes law professor Hilary Allen, investor Kevin O’Leary, the Cato Institute’s Jennifer Schulp, and Ben McKenzie Schenkkan, an actor and critic of cryptocurrencies. Prior to his arrest, Bankman-Fried had agreed to testify virtually at Tuesday’s hearing before the House Financial Services Committee but refused to appear at Wednesday’s Senate hearing — drawing the ire of that panel’s leaders.
–With assistance from Se Young Lee.
(Updates with comments from senators beginning in sixth paragraph.)
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