(NewsNation) — If more regulation had prevented the spectacular collapse of the cryptocurrency exchange FTX was fiercely debated at a Senate banking committee hearing on Wednesday. However, new legislation is potentially on the way.
Senator Elizabeth Warren announced at the hearing bipartisan legislation aimed at cracking down on cryptocurrencies being used for money laundering. The legislation, co-sponsored by Republican Sen. Roger Marshall of Kansas, would require cryptocurrency exchanges to verify customer identities like banks and other financial institutions do.
“Cryptocurrency has become the tool of choice for terrorists, ransomware gangs, drug dealers and rogue states that want to launder money,” said Warren, the Massachusetts Democrat, adding that “cryptocurrency doesn’t get a pass to help the worst in the world”. criminals, no matter how many TV ads they run or how many political contributions they make.”
Republican Sen. Cynthia Lummis of Wyoming said she and Democratic Sen. Kirsten Gillibrand of New York would reintroduce their bipartisan legislation, the Responsible Financial Innovation Act, next year. That law would require disclosures and consumer protection obligations by cryptocurrency issuers.
Lummis, like several other Republicans on the banking committee, said former FTX CEO Sam Bankman-Fried’s alleged financial wrongdoing should not be used to target cryptocurrency more generally.
“Let’s separate the digital assets from the corrupt organizations,” he said. “FTX is a good old fashioned fraud.”
However, Democratic Senator Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee, asked the hearing’s four witnesses (two cryptocurrency advocates and two critics) whether fraud was systemic at other companies in the industry. . All indicated that it was one of the few points of agreement in the entire audience.
Hilary J. Allen, a law professor at the American University Washington School of Law, testified that the current environment in which cryptocurrency operates is highly conducive to fraud.
“Sam Bankman-Fried may have engaged in a good old-fashioned embezzlement,” he said, “but the embezzlement was able to reach such a scale and go unnoticed for so long because it was cryptographic, shrouded in opacity, complexity and mystique. ”
Businessman Kevin O’Leary, better known as Mr. Wonderful on TV’s “Shark Tank,” disagreed with the characterization, even though the $15 million he earned as a paid FTX spokesperson is now essentially worthless.
“I am of the opinion that cryptocurrency, blockchain and digital payment systems will be the 12th sector of the S&P a decade from now,” he said, referring to the S&P 500, a well-known benchmark for stocks.
O’Leary also testified that Bankman-Fried told him that FTX’s collapse stemmed from its battle with crypto competitor Binance, which also had a stake in FTX.
“These two giants that owned the unregulated market together … were at war with each other,” O’Leary said. “And one put the other out of business.”
Federal prosecutors say Bankman-Fried defrauded FTX clients and investors beginning in 2019 and illegally diverted their money to cover expenses, debts and risky transactions at the cryptocurrency hedge fund he founded in 2017, Alameda Research. Bankman-Fried, 30, was arrested on monday in the Bahamas at the request of the US government, and remains in custody after being denied bail.
Pennsylvania Republican Sen. Pat Toomey, a ranking member of the banking committee, said that FTX’s shares do not reflect the cryptocurrency business as a whole.
“There’s nothing inherently good or bad about software, it’s about what people do with it,” he said. “Code did not commit any crime.”
However, actor and author Ben McKenzie Schenkkan, best known for his role as Jim Gordon on “Gotham,” said his research shows that cryptocurrency is based on “misinformation, exaggeration and fraud” and that the 40 million Americans who are estimated to have invested in them were lying to.
“In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history,” he said. “The fact that it has ensnared tens of millions of Americans from all walks of life, as well as hundreds of millions of people around the world, should concern us all.”