The fall of former cryptocurrency exchange FTX has had the entire industry in turmoil since the situation began to unravel days before it filed for bankruptcy on November 11. A new op-ed by US Senator Elizabeth Warren revealed a negative stance towards the industry regarding the drop.
Warren wrote that the cryptocurrency industry is on a “trodden path of financial innovation”, that starts with exciting rewards, but ends in “crippling losses.” He compared it to 2008 subprime mortgages, penny stocks and credit default swaps.
The senator said that what happened with FTX should be a “wake-up call” to regulators to apply the laws to the sector.
On Twitter, some agreed with the senator, tweeting that the cryptocurrency industry is just “smoke and mirrors” and that Warren has been trying to warn the public all along. Although many have returned the finger, saying that regulators do not understand the industry and incite fear with such comments.
One user pointed to a middle ground saying that there is room for regulation when it comes to centralized exchanges, which are very different from cryptocurrency technology and decentralized exchanges (DEXs).
Centralized exchanges for crypto are a far cry from crypto the technology. Know the difference and only regulate the centralized exchanges. The risk is the centralized exchanges, not the crypto and not decentralized exchanges/finance. Crypto did not fail. SBF failed. SEC failed.
—Steve Westhoff (@SteveWesthoff) November 22, 2022
The next day, without referring to the op-ed specifically, Binance co-founder and CEO Changpeng “CZ” Zhao also tweeted on the subject, saying that where there is progress, there is always failure.
Some (including me) say this will “set the industry back a few years.” But thinking about it, this is natural. There will be failures with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will recover quickly, and become stronger.
— CZ Binance (@cz_binance) November 23, 2022
In response to CZ’s tweet, many in the community said that this is the reset that they needed the cryptocurrencies.
Regulators in the United States have been actively voicing their concerns following the FTX scandal. On Nov. 21, US senators released a letter to Fidelity urging it to reconsider its Bitcoin (BTC) offerings in light of FTX.
On November 16, Warren, along with Senator Richard Durbin, released a letter they sent to FTX’s former and current CEOs: Sam Bankman-Fried and John Jay Ray III, respectively. The letter contained 13 requests for documents, lists and responses on the situation.
Warren has been a big critic of the cryptocurrency industry in the last year. He has previously called decentralized finance (DeFi) “dangerous” and has been active in exposing unsustainable practices in the US crypto mining scene.
His latest op-ed also addresses these topics, along with the role of cryptocurrency in money laundering and ransomware attacks.
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