The chairman of the US Senate Banking Committee, Sherrod Brown, has urged Treasury Secretary Janet Yellen to collaborate with lawmakers and banking authorities on comprehensive crypto legislation “in the wake of FTX’s downfall.”
In a letter dated Nov. 30 and addressed to Yellen, the Senate Banking Committee Chair, Brown demanded that the Treasury secretary works with authorities to address cryptocurrency by suggestions made by the FSOC. The “alarming fraud,” “liquidity crunch,” and insolvency of the cryptocurrency exchange FTX were referenced by the Senate Banking committee chair as examples of financial dangers that shouldn’t “spillover into traditional financial markets and institutions.”
According to Senate Banking Committee Chair, he requests that they work together with the other financial regulators to further develop the recommendations from the FSOC Report, including the creation of legislation that would give regulators the power to monitor and otherwise control the activities of affiliates and subsidiaries of crypto asset entities. As stated in the FSOC Report, individual regulatory bodies currently do not have a thorough understanding of the operations of crypto-asset businesses.
He further added,
“As the FTX failure makes clear, given crypto asset entities’ broad use of proprietary crypto tokens combined with opaque financial arrangements and the reliance on arbitrary valuation and data sources, the financial regulatory agencies should continue to find ways to enhance entity and crypto asset disclosures, market integrity, and transparency.”
FSOC Recommends Other Regulators Along With Senate Banking Committee
In response to U.S. President Joe Biden’s executive order on cryptocurrencies, the Financial Stability Oversight Council (FSOC) published a report in October that examined potential regulatory gaps and financial stability concerns of digital assets. The council suggested lawmakers enact legislation to specify which “rulemaking authority,” i.e., the Securities and Exchange Commission or the Commodity Futures Trading Commission, will be in charge of policing specific aspects of the cryptocurrency spot market. The report, according to Yellen at the time, offered “a sound framework for policymakers,” but no timetable for action.
Brown’s retort was the most recent from American lawmakers to weigh in on FTX’s insolvency and potential regulatory and legal action. Senators Elizabeth Warren and Sheldon Whitehouse wrote a letter to the Justice Department on November 23 urging them to “examine the collapse of the exchange with the utmost thoroughness” and consider bringing criminal charges against those responsible for misconduct at FTX. In order to address the failure of the cryptocurrency exchange, committees in both the House of Representatives and the Senate will hold separate hearings in December.