Senators discussed the merits of cryptocurrency and how best to regulate the industry in the wake of the FTX collapse at a Senate Banking Committee hearing on Tuesday.
“Recent crypto meltdowns have made it clear that we need a comprehensive framework to regulate crypto products, to protect consumers and our financial system,” said Chairman Sherrod Brown, D-Ohio.
Mr. Brown was also critical of crypto in general, arguing that digital assets are “speculative products driven by reckless companies … putting Americans’ hard-earned money at risk.”
While several Republican senators expressed concern about finding a way to regulate the crypto industry without stifling innovation, some Democrats on the committee doubted the benefits of digital assets.
Sen. Tina Smith, D-Minn., noted that she and fellow committee member Sen. Elizabeth Warren, D-Mass., has urged Fidelity to reconsider its decision to allow bitcoin exposure in 401(k) plans because they feel the asset is too risky.
“It’s not clear to me whether a lot of these so-called (digital) assets aren’t just a bet,” Smith said.
Warren also argued that crypto is attractive to criminals, such as drug traffickers, hackers in North Korea and ransomware attackers. That’s why she’s reintroducing a bill that would subject crypto to anti-money laundering rules, she said, which she originally introduced in December with Sen. Roger Marshall, R-Kan.
Ranking Member Tim Scott, RS.C., laid the blame on the SEC, questioning why the agency did not act before FTX’s fall and criticizing its response to the crash.
“To date, the SEC has failed to take any meaningful, preventative action to ensure that this type of catastrophic failure does not happen again,” Scott said. He also asked SEC Chairman Gary Gensler to appear before Congress to discuss the agency’s approach to crypto regulation.
Last Congress, leaders of the Senate Agriculture Committee proposed a bill to give the Commodity Futures Trading Commission greater oversight of the crypto market, allowing the agency to regulate the trading of digital goods.
However, Lee Reiners, director of policy at the Duke Financial Economics Center and lecturer at Duke Law, advocated for Congress to recognize cryptocurrencies as securities and give the SEC exclusive authority to regulate the industry.
“The SEC simply has more expertise, more resources and more appetite for enforcement in the crypto space than the CFTC does,” Reiners said.
In recent months, the SEC has accused several crypto companies of offering and selling unregistered securities, including Genesis Global Capital and Gemini Trust Company.
