The potential for new legislation was a major topic of discussion at a Senate Banking Committee hearing on Wednesday, which explored the fallout from the collapse of the cryptocurrency exchange FTX. Members of the committee debated whether tighter regulation could have prevented the incident.
Bipartisan legislation was announced that would require cryptocurrency exchanges to confirm customer identities, similar to what banks and other financial institutions do. The bill was co-sponsored by Republican Sen. Roger Marshall of Kansas.
“Cryptocurrency has become the instrument of choice for criminals, terrorists and rogue states who want to launder money,” stated Massachusetts Democrat Senator Elizabeth Warren. “Cryptocurrency doesn’t get a free pass to help the worst of the worst in the world, regardless of how many TV ads they run or how many political contributions they make.”
Republican Sen. Cynthia Lummis of Wyoming and Democratic Sen. Kirsten Gillibrand of New York will be reintroducing their Responsible Financial Innovation Act next year. This law would require cryptocurrency issuers to provide disclosure and consumer protection.
Republican Sen. Pat Toomey of Pennsylvania believes that the case of FTX should not be used to tar the entire cryptocurrency sector. “There’s nothing inherently good or bad about software, it’s about what people do with it,” he said. “Code did not commit any crime.”
Actor Ben McKenzie Schenkkan, best known for his role as Jim Gordon on “Gotham,” disagreed, saying that his research shows cryptocurrency is founded on “deception, exaggeration, and fraud”. He believes that the industry is the largest Ponzi scheme in history.
Businessman Kevin O’Leary, known from TV’s “Shark Tank,” believes that cryptocurrency and blockchain technology will be the 12th sector of the S&P 500 a decade from now. He claims that FTX’s collapse was caused by a battle with crypto competitor Binance.
The hearing’s witnesses, two cryptocurrency advocates and two critics, agreed that fraud exists in the industry. Hilary J. Allen, a law professor at the American University Washington School of Law, testified that the current environment favors fraud. Federal prosecutors accuse former FTX CEO Sam Bankman-Fried of defrauding clients and investors and diverting their money to his crypto hedge fund.
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