US Lawmaker Concerned About Crypto Exchange’s Consumer Protection After FTX Crash
In light of FTX’s liquidity problems and bankruptcy, Ron Wyden, chairman of the United States Senate Finance Committee, has asked for data from six cryptocurrency startups on consumer protection.
On November 28th, Wyden sent letters to Binance, Coinbase, Bitfinex, Gemini, Kraken, and KuCoin, asking them what safeguards they have in place in the event of a collapse similar to FTX’s. The senator claimed that customers of FTX who kept their cryptocurrency in an escrow account had “no such protections” as customers of banks and registered brokers do through the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation.
According to Senator Ron Wyden (D-Oregon), “The clear need for consumer safeguards along the lines of the assurances that have long existed for consumers of banks, credit unions, and securities brokers will be my emphasis as Congress considers much-needed rules for the crypto business.” Fewer retail investors would be suffering such severe losses today if these safeguards had been in place before the failure of FTX.
Wyden asked the six businesses to respond to a series of questions by December 12 regarding topics such as their subsidiaries, the security of client assets, the use of customer data, and protections against market manipulation. On December 1, the Senate Agriculture Committee will hold a hearing to investigate the FTX collapse, and Senators Elizabeth Warren and Sheldon Whitehouse have asked the Justice Department to investigate and potentially punish those responsible for the exchange’s collapse.
On the 13th of December, a similar investigative hearing regarding FTX will be held by the House Financial Services Committee. Maxine Waters, the committee’s chair, and Patrick McHenry, the ranking member, have both voiced their support for the congressional action. McHenry has described the events surrounding the unsuccessful exchange as a “dumpster fire.”
FTX has potentially over a million creditors, according to the bankruptcy procedures now taking place in the District of Delaware. The bankruptcy case’s next scheduled hearing is on December 16th.
