Dec 1, 2022 - Economy & Business

Senate hearing on FTX collapse spotlights proposed crypto rules

Rostin Behnam, chairman of US CFTC

CFTC Chair Rostin Behnam testifies to senate ag committee on FTX. Source: Bloomberg / Contributor

Lawmakers gathered on Thursday to discuss the events that led to crypto exchange FTX collapse, amid renewed calls from within their ranks — and from the public — for industry oversight.

Why it matters: The spectacular flameout of FTX — and the contagion that preceded and followed it — could finally provide momentum for U.S. regulation of the industry.

What they're saying: Senate Agriculture Committee Chairwoman Debbie Stabenow in her opening remarks highlighted the "lack of clear, consistent rules" that have allowed an industry to flourish, while American consumers lose billions.

  • "When exchanges accept customer funds for trading, they must not be allowed to gamble with those funds," Sen. Stabenow (D-MI) said, referencing one of the issues behind FTX's unwinding.

Details: Commodity Futures Trading Commission chair Rostin Behnam was the sole witness at Thursday’s hearing.

  • He emphasized the need for lawmakers to grant his agency the authority to create rules and oversee crypto trading.
  • "We need surveillance of market activity," Behnam said.
  • Behnam also expressed support for Sen. Stabenow's Digital Commodities Consumer Protection Act (DCCPA,) which he says would have "prohibited" some of the actions at FTX from taking place.

Catch up quick: The most recent version of the DCCPA, which provides for a definition of a "digital commodity" would place many cryptocurrencies under the purview of the CFTC.

  • Sen. Stabenow said during the hearing that the legislation would still allow the Securities and Exchange Commission to have oversight over crypto that it deems securities.

The intrigue: Sen. Cory Booker homed in on the influence that FTX and its former chief, Sam Bankman-Fried, might have had on the bill — which is sometimes called the "SBF Bill" — asking chair Behnam about FTX involvement.

  • Behnam said Sen. Stabenow and ranking member Sen. John Boozman (R-Ark.) were "inclusive in their exercise," and met with FTX as well as others.

The bottom line: Behnam emphasized the need for for a balance between "sufficient statutory direction" that is not overly specific to allow the rulemaking to evolve with the market.

Go deeper:

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Judge in FTX case grants privacy to customers, for now

FTX starts bankruptcy proceedings and Bankman-Fried resigns as CEO

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