The US Senate Banking Committee discussed last year’s cryptocurrency market crash and various business collapses during a hearing on Tuesday. February 14th.
President Brown calls for regulations
Several people commented on the state of the cryptocurrency industry. President Sherrod Brown took a tough stance on the matter, stating:
“These crypto catastrophes have exposed what many of us already knew: digital assets…are speculative commodities run by reckless companies that put Americans’ hard-earned money at risk. Not surprising in an industry that was built to skirt the rules.”
Brown said in his opening statement that the crypto market lost $1.46 trillion in 2022, while cybercriminals stole $3 billion and companies cut 1,600 jobs (a number that other estimates place). as high as 23,600). He also commented on the crypto industry. absence from the Super Bowl this year and discussed the extent of the FTX collapse.
Brown noted that while the crisis did not spill over into the broader financial system, that possibility was “glimpsed” when several crypto banks needed loans after bank runs.
He suggested that “basic common sense principles” applied elsewhere should be imposed on the crypto industry. His recommendations included consumer protection, conflict of interest prevention and transparency requirements.
Scott asks for SEC application
Ranking member Tim Scott suggested there is room for safe financial innovation, but acknowledged Brown’s concerns about the current state of regulation.
Specifically, Scott criticized the US Securities and Exchange Commission’s attempts to enforce the rules during the 2022 market crash. He said:
“The SEC has not taken any meaningful preventative action to ensure that this type of catastrophic failure does not happen again.”
Scott said investors need to know why the SEC failed to take action before FTX crashed and why millions of dollars in cryptocurrency investments can no longer be recovered. He added that this concern applies to other companies and projects, such as Land, Celsius, digital travelerand FiBlock – all of which failed in 2022.
Although the SEC has taken action against many cryptocurrency companies, it has often done so after the collapse of said companies. Several prominent companies remain in bankruptcy proceedings and have not returned funds to their clients.
Scott also noted that SEC Chairman Gary Gensler was absent during today’s Senate hearing despite making other public appearances. He said Gensler “should be here testifying with us this morning” and said Congress “needs to hear from him very soon.”
Witnesses comment on the industry
Three witnesses also testified during the hearing.
Lee Reiners, policy director at the Duke Financial Economics Center, noted that some cryptocurrencies are commodities instead of values. The CFTC regulates commodity derivatives, not commodity spot markets such as cryptocurrency exchanges. As such, Reiners urged Congress to close that regulatory loophole and presented options for doing so.
Yesha Yadav, a professor at Vanderbilt University School of Law, suggested that a public regulatory framework could allow cryptocurrency exchanges to partially self-regulate. This would allow companies to finance their regulatory efforts and save costs for taxpayers.
Linda Jeng, a professor at the Georgetown Institute for International Economic Law, suggested that the alleged “crypto crash” should be put in context. She said that the entire industry should not be declared a failure due to the collapse of certain companies. She added that the cryptocurrency market capitalization is still above $1 trillion and noted that full time crypto developers grew 8% year-over-year in 2022.
Each speaker’s prepared remarks did not focus on high-profile actions in recent days, such as those against Kraken’s betting service either The BUSD stablecoin of Paxos. Those developments will no doubt be a topic of future discussions.
