According to Mike Belshe, the US SEC’s reluctance to address a “core” regulatory issue like the issuance of a BTC ETF could have paved the way for FTX’s alleged illicit activities.
The bankruptcy of the FTX cryptocurrency exchange and other bearish developments in the sector were at the center of debates between legislators and witnesses at the inaugural hearing of the Subcommittee on Digital Assets, Financial Technology and Inclusion of the Financial Services Committee of the United States House of Representatives Joined.
Addressing lawmakers at the hearing on March 9, BitGo co-founder and CEO Mike Belshe criticized the United States Securities and Exchange Commission, or SEC, for enforcement actions against crypto companies that “try to get it right,” that is, communicate with regulators and find a way to operate in the country. He cited the experience of BitGo going through the process of approaching the SEC in 2018 seeking a regulatory path forward on the question of how the firm should hold assets, only to wait over 4 years for a definitive answer.
According to Belshe, the SEC’s reluctance to address a “core” regulatory issue like the issuance of an exchange-traded Bitcoin (BTC) fund could have seemingly opened the door for bad actors like Sam Bankman-Fried to operate FTX as it did. . The former CEO faces charges from the SEC, the Commodity Futures Trading Commission and federal prosecutors related to the transfer of user funds between the exchange and Alameda Research.
“One has to wonder if we couldn’t have prevented the huge amounts of money flowing into FTX if the basic principle of a Bitcoin ETF had been provided and approved by the SEC,” Belshe said. “There were more than 25 valid applications, some from Invesco and other big-name companies that have made ETFs for many years in the past.”
Much of the discussion between lawmakers and industry experts at the hearing centered on which federal agencies might regulate certain crypto assets if legislation were passed by Congress. Some House Republicans appeared to be particularly critical of the Biden administration’s approach to crypto assets, as evidenced by the hearing headline, which called their actions an “attack on the digital asset ecosystem.”
“This report outlines President Biden’s political plan to lawlessly abuse administrative status to push US crypto companies and their US clients into offshore, unregulated, opaque and insecure markets,” Rep. Tom Emmer said, citing a report. of January 27 from the White House on mitigating the risks associated with cryptocurrencies. “This administration is arming the banking industry to debank legal crypto activity here in the United States, using scare tactics to drive an entire industry out of the country.”
#HappeningNow: Chairman @RepFrenchHill convenes the Subcommittee on Digital Assets, Financial Technology & Inclusion for a hearing on the Biden Administration’s attack on the digital asset ecosystem.
Tune In https://t.co/FGQaA37IYN pic.twitter.com/DqBA6O5rcc
— Financial Services GOP (@FinancialCmte) March 9, 2023
Other witnesses in the hearing were more critical of cryptocurrencies as a whole rather than focusing on a single agency, political party, or presidential administration. Rep. Brad Sherman, a well-known critic of the space, referred to crypto as a “scourge” on the economic system. Lee Reiners, policy director at the Duke Financial Economics Center, claimed that while FTX was a “bad apple,” the entire cryptocurrency industry was “rotten.”
“Cryptocurrencies and their unique nature was what fueled the rise of FTX, and is what brought FTX crashing down in the blink of an eye,” Reiners stated.
The House subcommittee hearing was the first in the new session of Congress to address issues related to the cryptocurrency market and the FTX collapse since December 2022. Lawmakers on the Senate Banking Committee held their own hearing exploring the impact of the “crypto crash” in February.
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