A US senator pushing for larger federal regulation of cryptocurrencies says the collapse of Sam Bankman-Fried’s FTX trade must be a catalyst for lawmakers to begin taking note of crypto.
In an interview on the Monetary Instances’ Crypto and Digital Belongings Summit, Senator Cynthia Lummis mentioned FTX’s failure, which has resulted in $8bn in lacking buyer deposits, highlighted the necessity for larger regulation within the nascent crypto business. Lummis, a Republican from Wyoming, pushed as an answer a invoice which she launched in Congress in June with Kirsten Gillibrand, a Democratic senator from New York.
“I hope [FTX’s collapse] highlighted with members of Congress who haven’t taken the time to be taught extra about this asset class, that it’s time for them to be taught extra about it so we will interact in correct regulation,” Lummis mentioned.
The senator gained notoriety in Congress as an early champion of cryptocurrencies, shopping for her first bitcoin virtually a decade in the past; she nonetheless owns it however retains it in a blind belief.
She argued that clients like herself, who use crypto wallets to retailer their digital property and aren’t actively buying and selling them, don’t require extra oversight. As a substitute her push is for stricter guidelines round firms like FTX which commerce and have custody of purchasers’ property and are engaged in round lending practices similar to rehypothecation, the place the identical asset might be lent a number of occasions.
“We do it with different varieties of property when rehypothecation occurs. We have to do it with cryptocurrencies as effectively,” Lummis mentioned.
Lummis mentioned her crypto invoice would ban the commingling of buyer property with investments belonging to an trade — a apply which was on the coronary heart of the losses at FTX. It might additionally use the so-called Howey Check, which depends on a Supreme Court docket precedent, to find out which cryptocurrencies are or aren’t tradable securities. This clarification might assist extra mainstream monetary corporations to enter the house.
Her invoice stays within the Senate finance committee, and he or she claimed to be “very hopeful” that it could be “excessive on our legislative agenda” when Congress reconvenes in January.
Within the meantime, Lummis mentioned she is working with regulators on the US Securities and Trade Fee to make sure that her invoice wouldn’t create loopholes for some non-crypto firms to evade oversight.
“We’re listening to from sure folks inside the SEC that there could also be some unintended penalties within the invoice that might permit folks at present regulated by the SEC to redefine their property as digital property below Lummis-Gillibrand, and thereby have a decrease stage of regulatory scrutiny” Lummis mentioned.
“That’s not our intent. We don’t need that to occur.”