The “alarming fraud,” liquidity shortage, and bankruptcy of crypto exchange FTX were cited by the committee chair as examples of financial risks that the Treasury and regulators should address.
“In the wake of FTX’s implosion,” Sherrod Brown, chair of the United States Senate Banking Committee, has urged Treasury Secretary Janet Yellen to collaborate with lawmakers and financial regulators on comprehensive crypto legislation.
In a Nov. 30 letter to Yellen, Brown mentioned the Depository secretary coordinate with controllers to address crypto in light of proposals from the Monetary Steadiness Oversight Advisory group, or FSOC.
The “alarming fraud,” liquidity shortage, and bankruptcy of crypto exchange FTX were cited by the committee chair as examples of financial risks that should not “spillover into traditional financial markets and institutions.”
Brown stated, “I ask that you coordinate with the other financial regulators to further work on the recommendations from the FSOC Report, including the development of legislation that would create authorities for regulators to have visibility into, and otherwise supervise, the activities of the affiliates and subsidiaries of crypto asset entities.” “I ask that you coordinate with the other financial regulators.
“According to the FSOC Report, single regulatory agencies do not typically currently have a comprehensive view of the activities of crypto asset entities.
“The financial regulatory agencies should continue to find ways to enhance entity and crypto asset disclosures, market integrity, and transparency,” as the FTX failure demonstrates. “Given crypto asset entities’ widespread use of proprietary crypto tokens, the reliance on arbitrary valuation and data sources, and the opaque financial arrangements,”
In accordance with the executive order on cryptocurrency issued by U.S. President Joe Biden, the Financial Stability Oversight Council (FSOC) published a report in October that sought to investigate potential regulatory lapses and financial stability risks associated with digital assets.
The council suggested that legislation be passed to choose between the Securities and Exchange Commission and the Commodity Futures Trading Commission as the “rulemaking authority” for the crypto spot market. Yellen stated at the time that the report offered “a strong foundation for policymakers,” but that it did not provide a timetable for action.
Brown’s response was the latest attempt by lawmakers in the United States to weigh in on the bankruptcy of FTX and the possibility of regulatory and legal action. In a letter that was sent to the Justice Department on November 23, Senators Sheldon Whitehouse and Elizabeth Warren requested that the exchange’s demise be investigated with “the utmost scrutiny” and that individuals who were involved in wrongdoing at FTX be prosecuted.
In December, separate hearings on the collapse of the crypto exchange will be held by committees in both the House of Representatives and the Senate.