The news that American regulators were looking into FTX US, Coinbase, and Binance US in the wake of the FTX crisis disappointed Coinbase CEO, Brian Armstrong.
According to Armstrong, it makes no sense to take enforcement action against US-based companies for wrongdoings committed by an offshore cryptocurrency exchange that are outside the purview of US regulators.
Senator Elizabeth Warren’s request for “aggressive enforcement” as a follow-up to the FTX crisis prompted Armstrong to respond. The Securities and Exchange Commission (SEC) is to blame, according to the CEO of Coinbase, for the lack of regulatory clarity in the US, which he claims caused 95% of trading activity to move to foreign exchanges.
Coinbase CEO says that SEC failed to create regulatory clarity
Brad Garlinghouse, the CEO of Ripple and a defendant in a securities lawsuit filed with the SEC, used Singapore as an illustration. According to him, businesses in the US receive no guidance on how to comply, whereas, in Singapore, there is a clear licensing framework and tax economy, making compliance much simpler.
In contrast, Singapore has a licensing framework, a token taxonomy that is established, and much more. They can effectively regulate cryptocurrency because they have defined what “good” looks like and are aware that not all tokens are securities (despite what Chair Gensler insists).
The regulators are reportedly looking into whether or not some of FTX’s cryptocurrency lending products qualify as securities. Regulators are also investigating its connections to the parent company, which has its headquarters in The Bahamas.
With millions of users worldwide, FTX was one of the biggest cryptocurrency exchanges. Up until January 2022, the exchange had raised billions in a number of funding rounds. Even during the second quarter’s peak of the crypto contagion, FTX appeared unharmed and even bailed out numerous lending companies.
However, as of right now, the Binance deal failed 48 hours after it was announced. New allegations of improper handling of users’ funds and use of their own native token, FTX Token, as collateral have surfaced. SBF apparently asked investors for $8 billion in emergency funding due to the severity of the liquidity crisis.