Cryptocurrency exchange Binance announced an agreement to buy rival FTX amid reports of a liquidity crisis at the company, renewing concerns about volatility in the crypto sector.

Market Instability: The deal between two giants in crypto trading followed recent reports that the balance sheet of Alameda Research, a sister firm to FTX, was primarily composed of FTX's FTT token, raising concerns about FTX's solvency. Those concerns were exacerbated by an announcement from Binance chief Changpeng Zhao that it is liquidating its holdings of FTT, by reports of investment outflows from FTX, and by FTX users’ social media posts on delays in withdrawing assets.

New Sanctions: The news came the same day that Treasury’s Office of Foreign Assets Control amended its sanctions on the Tornado Cash virtual currency mixer. OFAC’s redesignation of Tornado Cash accounts for additional information on how the entity has been used to launder virtual currency, including $455 million stolen by North Korea’s Lazarus Group.

ICBA Position: ICBA last week told the Treasury Department that protecting national security and implementing anti-crime measures should be primary drivers of cryptocurrency policymaking and regulation. Reflecting previous ICBA calls for regulators to prioritize national security in new crypto rules, ICBA noted that bad actors still use Tornado Cash despite it being federally sanctioned.

More Resources: Earlier this year, ICBA published a series of blog posts on volatility in the stablecoin market, including the collapse of the TerraUSD stablecoin, its impact on financial markets, and how it affects community banks and the regulatory debate