Senate Finance chair questions crypto exchanges following FTX failure

Nov. 30, 2022

Washington continued to escalate its response to instability in the crypto sector as the Senate Finance Committee’s chairman questioned leading crypto exchanges on their consumer protections.

Consumer Focus: Sen. Ron Wyden (D-Ore.) sent letters to Binance, Bitfinex, Coinbase, Gemini, Kraken, and KuCoin asking whether the exchanges provide any protections for customers if they fail. With Congress considering how to regulate the crypto industry, Wyden said he will focus “on the clear need for consumer protections” along the lines of those available at banks and other regulated institutions.

BlockFi Bankruptcy: The letters came a day after crypto lender BlockFi filed for Chapter 11 bankruptcy protection in the latest fallout from FTX's collapse earlier this month. BlockFi said its largest creditors include FTX, which provided the lender a $400 million line of credit in June following the collapse of the TerraUSD stablecoin.

FTX Meltdown: FTX filed for bankruptcy earlier this month as a run on the crypto exchange—and reportedly a series of hacks—depleted its holdings. The Securities and Exchange Commission and the Commodity Futures Trading Commission are reportedly investigating FTX, which caretaker CEO John Ray has said suffered from a complete failure of corporate controls and absence of trustworthy financial information.

ICBA Op-ed: Following the collapse of FTX, policymakers should ensure new policies directed at the crypto sector fully reflect its risks, ICBA President and CEO Rebeca Romero Rainey wrote in a recent op-ed on Medium. Romero Rainey said the ongoing crypto failures validate what community banks have long warned—the crypto sector is fragile, prone to facilitating financial crime, entirely lacking in the protections available in the banking system, and ultimately a poor alternative to banking locally.

Committee Activity: The Senate Agriculture Committee is scheduled to meet tomorrow for a hearing on the FTX collapse and the congressional response. The House Financial Services Committee has said it will host its first FTX hearing on Dec. 13, and the Senate Banking Committee has said it also intends to hold hearings.