Referring to the events surrounding the FTX collapse as “a handful of magic beans,” Massachusetts Senator Elizabeth Warren appeared to frame the “contagion” sweeping through the cryptocurrency space as a partisan issue.
At a Senate Banking Committee nomination hearing on November 30, Warren turned to committee counsel Jonathan McKernan, who confirmed that the FTX bankruptcy had not greatly affected America’s traditional banking institutions. The Massachusetts senator, an outspoken cryptocurrency skeptic, used part of her time to applaud the work of current FDIC Chairman Martin Gruenberg, who was in attendance as part of his nomination to take office. as part of a five-year term.
“Our banks stayed safe even when crypto went belly up because many of President Biden’s regulators, like Acting President Gruenberg, fought to prevent crypto from becoming dangerously intermingled with our banks,” Warren said. “He did this despite aggressive efforts by the Trump administration and cryptocurrency proponents to bring cryptocurrency with all its risks to traditional banking.”
Gruenberg answered in the affirmative to one of Warren’s questions in which he claimed that the banking system would have been “less secure” if firms like FTX had received similar insurance from the FDIC:
“The evidence is now clear. We had companies that were highly speculative, highly leveraged, and vulnerable to a loss of confidence in a run. They had no direct exposures to the insured financial institutions, and as a result the failure of those companies was really limited to the cryptocurrency space, and ended up not affecting the insured banking system.”
Warren went on to refer to crypto assets as “toxic” and unsuitable for integration into traditional banking, stating that taxpayers could suffer the consequences. The senator was one of the authors of a letter sent on November 23 calling on the Department of Justice to investigate the bankruptcy of FTX and to be able to prosecute the people implicated in the violations, specifically naming former CEO Sam Bankman -Fried for his role in the controversy.
The repercussions of a major exchange like FTX going bankrupt in the middle of a bear market are constant. Cryptocurrency company BlockFi filed for Chapter 11 bankruptcy on November 28, alleging that FTX owed certain financial obligations to the company. Lawmakers and regulators around the world have also announced their intention to investigate developments surrounding FTX and to potentially create new regulatory frameworks, including those of the European Central Bank, US state governments and Bahamian securities regulators. .
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