The chairman of the US Senate Banking Committee, Sherrod Brown, has urged Treasury Secretary Janet Yellen to collaborate with lawmakers and banking authorities on comprehensive crypto legislation “in the wake of FTX’s downfall.”
In a letter dated Nov. 30 and addressed to Yellen, Brown demanded that the Treasury Secretary work with authorities to address cryptocurrency in accordance with suggestions made by the FSOC. The “alarming fraud,” “liquidity crunch,” and bankruptcy of the cryptocurrency exchange FTX were cited by the committee chair as examples of financial risk that shouldn’t “spillover into traditional financial markets and institutions.”
Brown said, “I ask that you work with the other financial regulators to further develop the recommendations from the FSOC Report, including the development of 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. “Single regulatory agencies currently generally do not have a full perspective of the actions of crypto asset entities,” the FSOC Report stated.
“As the FTX failure shows, the financial regulatory agencies should continue to find ways to enhance entity and crypto asset disclosures, market integrity, and transparency given the wide use of proprietary crypto tokens by crypto asset entities along with their reliance on arbitrary valuation and data sources.
In response to U.S. President Joe Biden’s executive order on cryptocurrencies, the Financial Stability Oversight Council (FSOC) published a report in October that examined potential regulatory gaps and financial stability concerns of digital assets. The group advised that lawmakers enact legislation to specify which “rulemaking authority,” i.e., the Securities and Exchange Commission or the Commodity Futures Trading Commission, will be in charge of overseeing specific aspects of the cryptocurrency spot market. The report, according to Yellen at the time, offered “a sound framework for policymakers,” but no timetable for action.
Brown’s retort was the most recent from American lawmakers to weigh in on FTX’s insolvency and potential regulatory and legal action. Senators Elizabeth Warren and Sheldon Whitehouse wrote a letter to the Justice Department on November 23.