FTX drama: It’s not often that Democrats and Republicans agree on much, but the fallout from the recent FTX collapse has led to a bipartisan effort to hold a formal hearing in Congress on the entire debacle.
Yesterday, Congress’s Financial Services Committee announced it would launch an inquiry into FTX next month. In a joint statement, current Chair Maxine Waters and Patrick McHenry said the Committee would be exploring the underlying causes of the collapse of FTX and impact on the broader digital asset ecosystem.
As per the announcement, the Committee expects to hear from the companies and individuals involved, including Sam Bankman-Fried (SBF), Alameda Research, Binance, FTX, and related entities, among others. One wonders whether SBF will actually appear in person, given rumours of him trying to flee to Dubai. That remains to be seen as reports have surfaced of him casually shopping at a grocery store in the Bahamas.
Speaking to the havoc created by the FTX meltdown, Chair Maxine Waters said:
“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds. Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year.
That’s why it is with great urgency that I, along with my colleague Ranking Member McHenry, announce the Committee’s intention to hold a hearing to investigate the collapse of FTX,” said Chairwoman Waters.”
Waters added, “we need legislative action to ensure that digital assets entities cannot operate in the shadows outside of robust federal oversight and clear rules of the road”. She ended her statement saying the hearing was important to uncover “all that Congress must do to ensure this never happens again”.
Republican member McHenry echoed these sentiments saying “it’s essential that we hold bad actors accountable so responsible players can harness technology to build a more inclusive financial system”.
Ol’ Janet Yellen chimes in on FTX
Meanwhile, Secretary of the Treasury Janet Yellen who pulls the financial strings in government had her own two cents to add on the matter:
“The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets”.
She identified some of the risks to the sector to include comingling of customer assets, lack of transparency, and conflicts of interest – all of which surfaced over the past week.
Speaking to “strong investor and consumer protection laws”, Yellen said that the same ought to be enforced “rigorously” to crypto assets and services. She wrapped up by expressing concerns of how interconnected traditional financial markets and crypto were, further amplifying the need for consumer protection and “financial stability”.
Yellen, who previously was the chair of the Federal Reserve, is famously at odds with crypto. And while her intentions may well be good, her close ties with financial institutions – US$7.2 million in speaking fees with financial institutions between 2019 and 2021 – naturally predisposes her to oppose the industry.