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<\/p>\nThe collapse of crypto exchange FTX and other bearish events in the space were at the center of discussions among lawmakers and witnesses at the inaugural hearing of the United States House Committee on Financial Services\u2019 Subcommittee on Digital Assets, Financial Technology and Inclusion.<\/p>\n
Addressing lawmakers at the March 9 hearing, BitGo co-founder and CEO Mike Belshe criticized the U.S. Securities and Exchange Commission for enforcement actions against crypto firms \u201ctrying to do it right\u201d \u2014 i.e. communicating with regulators and pursuing a path to operate in the country. He cited BitGo\u2019s experience going through the process of approaching the SEC in 2018, seeking a regulatory path forward on the question of how the firm should custody assets, only to wait more than four years for a definitive answer.<\/p>\n
According to Belshe, the SEC\u2019s reluctance to address a \u201cbasic\u201d regulatory issue like the issuance of a Bitcoin (BTC) exchange-traded fund could have seemingly opened the door for bad actors like Sam Bankman-Fried to operate FTX as he did. The former CEO faces charges from the SEC, the Commodity Futures Trading Commission and federal prosecutors related to transferring user funds between the exchange and Alameda Research.<\/p>\n
\u201cYou do have to wonder if we couldn\u2019t have avoided the massive amounts of money that flowed to FTX if the basic principle of a Bitcoin ETF had been provided and approved by the SEC,\u201d said Belshe. \u201cThere had been 25-plus valid applications \u2014 some from Invesco and other reputable firms that have done ETFs for many years in the past.\u201d <\/p>\n
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Much of the discussion among lawmakers and industry experts at the hearing centered around which federal agencies could regulate certain crypto assets should Congress pass related legislation. Some Republican representatives seemed to be particularly critical of the Biden administration\u2019s approach to crypto, as evidenced in the hearing\u2019s title calling its actions an \u201cattack on the digital asset ecosystem.\u201d<\/p>\n
\u201cThis report summarizes President Biden\u2019s political plan to lawlessly abuse the administrative state to push American crypto firms and their United States customers into offshore, unregulated, opaque and unsafe markets,\u201d said Representative Tom Emmer, citing a Jan. 27 report from the White House on mitigating the risks associated with crypto. \u201cThis administration is weaponizing the banking sector to debank legal crypto activity here in the U.S., using scare tactics to run an entire industry out of the country.\u201d<\/p>\n
Other witnesses at the hearing were more critical of crypto as a whole rather than focusing on blaming any single agency, political party or presidential administration. Representative Brad Sherman, a well-known critic of the space, referred to crypto as a \u201cscourge\u201d in the economic system. Lee Reiners, the policy director of the Duke Financial Economics Center, claimed thatthough FTX was one \u201cbad apple,\u201d the entire crypto industry was \u201crotten.\u201d <\/p>\n
\u201cCrypto and the unique nature of crypto was what fueled FTX\u2019s rise, and it\u2019s what made FTX collapse in the blink of an eye,\u201d said Reiners.<\/p>\n