The head of the Senate Banking Committee is calling for tougher cryptocurrency regulation.
In a letter published Wednesday (Nov. 30), U.S. Senator Sherrod Brown called on Treasury Secretary Janet Yellen to work with him and other regulators to craft stronger crypto laws following the collapse of the FTX exchange.
“As we continue to learn more details, the failure of this crypto exchange brings to mind the litany of financial firm failures due to the combination of reckless risk-taking and misconduct,” wrote Brown, a Democrat from Ohio.
He added that it is “crucial that risks in this area are contained and do not spillover into traditional financial markets and institutions, and we draw the correct lessons regarding customer and investor protection.”
The senator asked Yellen to work with other financial regulators to develop legislation that “would create authorities for regulators to have visibility into, and otherwise supervise, the activities of the affiliates and subsidiaries of crypto asset entities.”
Brown is among numerous public officials and crypto industry figures who say the FTX bankruptcy shows the need for greater oversight of the sector.
Earlier this week, Sen. Cynthia Lummis said the FTX crisis should speed consideration of a bill she introduced in June with Sen. Kirsten Gillibrand that would apply tougher rules to companies that trade and have custody of clients’ assets.
That bill would also ban the commingling of the assets of exchanges and their clients and would provide clarity on whether cryptocurrencies are tradable securities.
Meanwhile, the fallout from the collapse continues to spread, with some companies declaring bankruptcy and others facing heavy losses.
“This crisis is a game changer,” Xavier Vives, professor of economics and finance at IESE Business School, told PYMNTS Wednesday. “It has all the elements of a classic bubble, where people get carried away and if you look at it from the outside you say, OK, this is crazy, but when you are in it, you can’t.”
As it is, Vives said, many people have no understanding of blockchain technology or its applications, but nonetheless put their money into it due to the hype.
“These are the classic ingredients for a bubble, no matter what century it is, the Tulip Mania in 17th century Holland or the free banking era in the U.S.,” he said.
For all PYMNTS crypto coverage, subscribe to the daily Crypto Newsletter.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More