The demise of FTX has rung alarm bells across Washington, D.C. United States congressman Brad Sherman, a known cryptocurrency skeptic, has blamed “billionaire crypto bros” for delaying much-needed cryptocurrency regulation.
In a statement issued on November 13 in response to the collapse of crypto exchange FTX, Sherman stated that the exchange’s demise demonstrated the need for regulators to take immediate and aggressive action:
“The sudden collapse this week of one of the largest cryptocurrency firms in the world has been a dramatic demonstration of both the inherent risks of digital assets and the critical weaknesses in the industry that has grown up around them.”
“For years, I have advocated for Congress and federal regulators to take a more aggressive approach to confront the numerous threats to our society posed by cryptocurrencies,” he added.
Sherman announced plans to work with his colleagues in Congress to examine federal legislation options, which he hopes can be carried out without the financial influence of cryptocurrency industry members:
“To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective.”
“I believe it is more vital than ever that the SEC take strong action to address the regulatory gray area in which the crypto business has functioned,” the senator continued.
While Sherman specifically referenced former FTX CEO Sam Bankman-Fried and his political contributions to the Democratic Party, he also named Ryan Salame, FTX’s co-CEO, who gave to Republicans in 2022.
Bankman-Fried was also reported to have donated $39.8 million to both the Democratic and Republican parties in the recent 2022 U.S. midterm elections. With nearly $40 million, he was the sixth-largest contributor.
While Sherman has pushed for an “aggressive approach” to cryptocurrency regulation, Thomas Hook, a Professor of Cryptocurrency Regulation at Boston University School of Law, recently told Cointelegraph that authorities should focus on “common sense regulation:”
“[Regulators] are reacting to an industry that is evolving constantly but overregulation could stifle that innovation […] poorly thought-out regulation could create a two-fold issue: first it could limit US consumers’ ability to participate in the cryptocurrency ecosystem and it could also drive these businesses to less regulated jurisdictions.”
“This really increases the risk for clients because it places them in a situation where they must engage with less regulated institutions in order to participate in the ecosystem,” he added.
His remarks, however, were made prior to the demise of the FTX cryptocurrency exchange. Cointelegraph has reached out to Hook to see if his stance has shifted in light of the recent occurrences.
Meanwhile, Shark Tank presenter and wealthy venture capitalist Kevin O’Leary told CNBC in a Nov. 11 interview that US authorities “need to start with one item” rather than regulating everything at once, urging Congress to start with the Stablecoin Transparency Act.
Given the recent events at FTX, O’Leary believes institutional investors would likely hold off on committing “real cash” into new companies until a genuine regulatory framework is established:
“That would signal to everybody around the world that regulators in the United States are taking crypto on, starting to put rules in place, putting the guard rails on, no one is going to play ball in this space on an institutional level with serious capital until we get it done.”
The Central Bank Digital Currency Study Act of 2021, the Digital Commodities Consumer Protection Act of 2022 (DCCPA), the Stablecoin Transparency Act, and the Cryptocurrency Tax Clarity Act are among the most important cryptocurrency legislation submitted in the United States Congress.
Future legislation will be centered on President Joe Biden’s executive order in March 2022, which will include legislation aimed at improving consumer and investor protection, promoting financial stability, combating illicit finance, and improving the United States’ standing in the global financial system, as well as financial inclusion and responsible innovation.