Congress, slow to move on regulating crypto, becomes transfixed by FTX's collapse, as lawmakers wonder if the crisis could have been prevented
The stunning collapse of the world's third-largest exchange has forced politicians to grapple with the costs of legislative inaction
Washington PostTony Romm
Context & Ripple Effects
Before FTX, crypto's growing Washington influence had already made it a stumbling block in the infrastructure-bill fight. Its collapse turns that political friction into a question of whether Congress failed to establish safeguards for a major exchange.
Congress faces intensified scrutiny over its failure to act on crypto rules, with FTX becoming the test case for whether lawmakers could have constrained exchange risks earlier.
FTX's collapse puts the crypto sector's Washington advocates on the defensive as lawmakers reassess the consequences of industry-friendly legislative delay.
Second-order effects
U.S. financial regulators gain greater impetus to restrict crypto firms' access to banking, a response later described as accelerating after FTX's collapse.
Banks reassessing even small crypto exposures reduce the industry's available financial partners, reinforcing pressure created by congressional inaction and regulatory enforcement.
Third-order effects
If Congress continues to stall, U.S. crypto oversight is likely to be shaped more by banking access and agency action than by a comprehensive statutory regime.
The divergence between proposed EU rules and U.S. legislative deadlock points toward more fragmented regulated liquidity for crypto businesses operating across jurisdictions.
The trend: FTX marks a shift from crypto's influence-driven policy debate toward a legitimacy contest in which market access is increasingly set by regulators and banks when Congress does not legislate.
Breaking: Sources say a GOP House means hearings into @SBF_FTX. One focus: SBF meeting w @GaryGensler to create a crypto exchange and if he was given preference because of his ties to Dem Party. Also why @SECGov didn't see the FTX implosion coming more now @FoxNews @JesseBWatters
Toomey says it's similar to the mortgage crisis. After the 2008 crisis, “did we decide we were going to get rid of mortgages? Of course not.” Says crypto is similar. There are problems, but they can be fixed.
It certainly appears FTX committed an egregious failure in not treating customer assets as segregated assets. If people had access to regulated crypto custody services, they might sleep more comfortably knowing those assets were unlikely to be used for inappropriate purposes. htt…
NEW: The sudden collapse of FTX rattled the nation's capital, as lawmakers grappled with the wide-ranging fallout — and began to confront the consequences of their legislative neglect. They let me back on the tech beat again :) https://t.co/wqGSd4uWjk
“What's perplexing is that the @SECGov and @CFTC have done so little so far, even as @SBF_FTX (also a Democratic Party megadonor) wooed them and everyone else in Washington” - @washingtonpost Editorial Board 👇🏻 https://www.washingtonpost.com/ ...
@binance's role? @FTX_Official collapsed b/c @SBF_FTX IS A CRIMINAL who engaged in fraud, committed insider trading, and stole people's money. Did they investigate LUNA and the role that possibly SBF had on it? Looks like $40M in donations buys you some excuses. https://twitter.c…
2023 will be the year of crypto regulation We will all be called on to explain the great power & potential of these open, permissionless networks to the world 🫡 https://www.washingtonpost.com/ ...
A reality of our campaign finance system is that politicians take money from people who have interests before Congress. But the Sam Bankman-Fried episode tests the limits. And when I personally confronted members last night, they wouldn't answer. https://www.thedailybeast.com/ ..…
FTX's fraud wasn't a failure of US regulation. There are many laws on the books that prohibit US exchanges from trading customer funds. FTX was a Bahamian exchange, not a US one. But, if FTX had US customers (by VPN), then it *was* a failure of US regulators, both SEC and CFTC.
“the FTX fallout shows crypto needs regulation” ummm this offshore group was talking to every regulator while running what appears to be a ponzi scheme and no one asked any questions maybe we need better regulators who actually do, like, basic due diligence?
Republicans were the central political power behind crypto. There are endless examples but here's the head of the Senate Banking GOP Pat Toomey in March. https://t.co/zePBKvpy4L
Democrats are at odds over crypto legislation. Sherrod Brown says he's not sure it's needed. He has problems with Debbie Stabenow's bill, which FTX backed. Elizabeth Warren wants a comprehensive plan. https://www.politico.com/...
Senate Banking Chair Sherrod Brown's first hearing next session should be on crypto and it should be titled “I Fucking Told You So” and it should be two hours of Saule Omarova cursing at the Senators who opposed her nomination to the OCC because she wanted to regulate crypto.
I'm glad Congress is holding a bipartisan hearing to get to the bottom of the FTX collapse. Innovation & technology are critical for our competitiveness, & to ensure our future success we must hold bad actors accountable. https://www.reuters.com/...
We don't know all the facts yet, but Sam Bankman-Fried made huge political contributions as did other FTX officers. FTX met privately with the SEC. Did they buy off Washington? Congress must investigate (Members who didn't take the money that is). https://cointelegraph.com/...
House Financial Services Ranking Member McHenry: The FTX collapse has been a dumpster fire FTX users has been left out to dry — SEC Chair is more interested in chasing headlines than bad actors. Congress must develop a clear regulatory network esp for trading platforms.
Don't worry, these are the people in Congress who are going to get to the bottom of the FTX collapse. It's like they're not even trying to hide it anymore. https://twitter.com/...
Worth pointing out that when we announced a mere whitepaper for Libra on 6/18/19, it took less than 24h for me to be called to testify in front of both the Senate and the House. Meanwhile the total meltdown of FTX unscrupulously misappropriating ≈$10B of customers funds...