US House Committee to Hold Hearing on FTX Collapse – Regulation Incoming?
The US House Financial Services Committee plans to investigate the collapse of FTX and hold a hearing on the matter next month.
Current Chair and Congresswoman Maxine Waters, D-Calif., and Congressman Patrick McHenry, R-N.C., announced the hearing in a joint statement on Wednesday, saying that they expect to hear from the companies and individuals involved, including FTX founder Sam Bankman-Fried, Alameda Research, Binance, and more.
Waters said that the collapse of FTX hurt over one million users, many of whom were retail traders who invested their "hard-earned" savings into the platform, only to watch it all disappear within a matter of seconds.
"Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year," she added. "[I] know that we need legislative action to ensure that digital assets entities cannot operate in the shadows outside of robust federal oversight and clear rules of the road."
In a separate statement, US Representative Patrick McHenry, the top Republican on the House Financial Services Committee, said, "we must get to the bottom of this for FTX’s customers and the American people. It’s essential that we hold bad actors accountable so responsible players can harness technology to build a more inclusive financial system."
FTX announced that it had filed for Chapter 11 bankruptcy in Delaware late last week after a week of speculations around the health of the company. Notably, FTX US was also included in the proceedings, despite claims by the former CEO that their US exchange was fine.
As reported, FTX lent as much as $10 billion worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research. Since FTX had $16 billion in customer assets, the exchange had lent more than half of its customer funds.
Meanwhile, FTX contagion has spread wildly over the past few days, reaching BlockFi, Genesis, and Gemini. As per the latest reports, crypto lender BlockFi is preparing to file for bankruptcy, while Genesis announced yesterday that it was halting redemptions on its lending product and would stop making new loans.
Notably, many in the crypto industry have warned that the recent developments around FTX will surely attract more regulatory scrutiny. Former Microstrategy CEO and Bitcoin bull Michael Saylor said:
“I think it’s definitely going to strengthen the hand of the regulators. It’s going to accelerate their intervention. There’s a regressive regulation, which is to say, you can’t really do anything, and that’ll contract the industry."