Congress’s Failure to Pass Regulation Caused FTX’s Debacle, Asserts Crypto-Friendly Senator

Binance To Liquidate FTX’s Token FTT Holdings “Due To Recent Revelations”

US Senator Pat Toomey has blamed FTX’s collapse on the lack of clear regulations. Speaking during the Financial Regulators Hearing on November 15, the legislator took aim at the US Congress, suggesting that if the house had passed regulations on custody for the industry earlier, the FTX implosion could have been avoided.

“It certainly appears FTX committed an egregious failure in not treating customer assets as segregated assets,” Toomey said. “If people had access to regulated crypto custody services, they might sleep more comfortably knowing those assets were unlikely to be used for inappropriate purposes.

According to him, the collapse of FTX could not be blamed on the kind of assets that were held by the exchange but it was “about what individuals did with those assets.” The legislator further noted that the misappropriation of assets by FTX officials may have been caused by the presence of the tough crypto custody rules imposed by the US banking regulator.

“My understanding is that your office discourages banks from providing custody services among other services in the crypto space,” Toomey told Michael J. Hsu, the Acting Comptroller of the Currency.  Asked if they discouraged banks from engaging in crypto custody services, Hsu replied that they only discouraged banks from “doing things that are not safe sound and fair.”

Hsu went on to note that the custody of crypto was different compared to traditional assets adding that they were yet to draw up rules on the same. “There are some underlying fundamental issues and questions regarding what it means to own crypto through custody that have not been fully worked out,” Hsu said.

Despite the Terra meltdown in May, US legislators have been painstakingly slow in coming up with regulatory guardrails for the crypto sector. This has been combined with the hostility and lack of transparency by the Securities and Exchange Commission (SEC) generating a debilitating amount of legal uncertainty. Recently, Toomey noted that the impact on Americans from the bankruptcy filing by FTX might have been mitigated if there were a sensible, legislatively authorized, American regulatory framework for digital assets

However, FTX’s epic collapse has been a renewed call for Congress to take a serious look at crypto exchanges and lending platforms. Thus, whereas the saga will likely give rise to several civil and criminal actions against the exchange and its executives, a set of actual regulatory changes are likely to emerge.

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn
On Key

Related Posts

Crypto Crisis Pushes BTC Mining Difficulty To Bottom Spot, Any Possibility Of Reversal?

The low profitability of BTC mining is still puzzling for many crypto fanatics and investors. There’s no surprise here, given the ever-increasing energy costs. Moreover, the bear market is also significantly impacting Bitcoin’s mining difficulty. As for now, making reasonable profits from mining Bitcoin is not probable. This fact, however, doesn’t imply that BTC mining

Bitcoin (BTC) Price Dump Incoming? On-Chain Data Reveals Bottom

Bitcoin (BTC) price failed to hold above $17k and fell to the support near $16,500 again. The BTC price remains under pressure as miner capitulation risk continues to haunt traders looking to make long positions. On-chain data reveals miners are indeed liquidating their Bitcoin holdings due to financial constraints. The effect can be easily seen