They used the resulting fiasco as leverage to claim that the crypto industry requires stricter regulation. A number of officials were quite vocal about the condition of the market and how investors are suffering, especially those who have suffered by the swift downfall of FTX.
Numerous lawmakers have asserted that a regulatory framework for the crypto market is urgently required.
Before things became so convoluted, it had seemed that Binance might acquire FTX, which prompted a statement from Congressman Patrick McHenry.
Hailing from the House Financial Services Committee, the leading Republican said that there was a need for crypto regulation.
He said that the need for Congressional action was quite apparent in recent events and that a framework should be established by Congress to ensure that people have adequate protection in space.
Maxine Waters, who heads the committee, also expressed similar concerns on Thursday about the crypto industry.
She suggested that they could have prevented the significant amount of harm that investors suffered, had there been any federal regulation in place.
She said that it had become apparent that the consequences of crypto entities operating without any regulatory oversight can be disastrous because there are no protections for customers.
Sherrod Brown, the head of the banking committee, said that the collapse of the FTX exchange should be studied by financial watchdogs to determine exactly how customers’ funds had been mishandled.
The US Senator said that the implosion of the FTX exchange was a warning sign that there could be a failure. He added that the turmoil in the crypto market shows that crypto should be regulated and their role in the economy should be determined.
Lack of clarity
Brad Sherman, who heads the committee on investor protection, said that the key reason that the FTX situation was so disastrous was that there is no clarity when it comes to regulations for crypto.
The Congressman said that this was partly due to the Securities and Exchange Commission (SEC). He said that the SEC needs to take decisive action because there are still some gray areas in the crypto market.
He added that the efforts of billionaire crypto entrepreneurs of preventing meaningful legislation by lobbying spending and making campaign contributions worth millions of dollars have been quite effective.
Senator Patrick Toomey also said that a clear regulatory framework is required. He has previously criticized the SEC for using enforcement as their approach to regulation in the crypto space.
He said that the FTX incident highlights the need for a proper regulatory framework that should include the segregation of customer funds by centralized exchanges.
The SEC has been under fire before as well when the Terra ecosystem imploded in May, and things do not appear to have changed.
People have now become concerned about other crypto exchanges that are operating in the market because of a lack of regulatory clarity.