In a press conference on 10th November, White House Press Secretary Karine Jean-Pierre told reporters, “The administration has consistently maintained that, without proper oversight of cryptocurrencies, they risk harming everyday Americans.”
The press conference came after the cryptocurrency exchange FTX’s bankruptcy. The CEO of FTX, Simon Bankman-Fried, stepped down as the company filed for Chapter 11 bankruptcy protection.
Simon Bankman-Fried and FTX’s Bankruptcy
It’s important to highlight that Simon Bankman-Fried (SBF) had been a strong advocate of the crypto industry and had become Washington’s favorite crypto-giant. Capitol Hill is home to the United States Senate, House of Representatives, Supreme Court, and Capitol.
SBF had maintained a regular presence, seeking and generating many supporters, in the seat of the U.S. government for almost a year. SBF had donated $ 5 million to a super PAC (independent expenditure-only political committee) that supported Biden as the presidential candidate in 2020.
The year was filled with promises of technology and growth responsibly. FTX was looking for investors and a rescue deal from the rival cryptocurrency exchange Binance.
As per SBF, the assets and collateral FTX owned from its international operations were higher than its client deposits. An aggressive rate of withdrawals from clients in the USA left the company with a larger deficit.
Binance’s official statement cites the reasons for backing out of the rescue deal as the alleged U.S. agency investigations and reports of mishandling customer funds. The SEC (Securities and Exchange Commission) and the Department of Justice are reportedly looking into FTX’s operations and looking for a breach of securities laws.
Comments from Washington
Being touted as the industry darling, it’s no surprise that the collapse of FTX resulted in direct criticism from the Biden White House. While SBF admitted to his incompetence and apologized over a tweet before the conference, two powerful Democratic committee chairs called for more strict oversight of the industry.
The chair of the House Financial Services Committee, Representative Maxine Waters, representative of California, stated, “Now more than ever, it is clear that there are major consequences when cryptocurrency entities operate without robust federal oversight and protections for customers.”
As per an anonymous source, she is considering calling Bankman-Fried to Capitol hill to testify and open a congressional inquiry. SBF had also supported the Republican representative, Patrick McHenry, in his 2022 midterm elections through the Crypto Innovation PAC.
When Binance was looking to rescue FTX, Henry stated, “The recent events show the necessity of Congressional action. It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here in the U.S.”
Chair of the influential Senate Banking Committee, Senator Sherrod Brown, said in a statement, “It is crucial that our financial watchdogs look into what led to FTX’s collapse so we can fully understand the misconduct and abuses that took place.”
White House press secretary, Karine Jean-Pierre, told reporters that they would continue to monitor the situation and re-emphasized the need for more regulations. A direct quote from the conference reads, “The most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed. The White House, along with the relevant agencies, will again closely monitor the situation as it develops.”