‘Driving Force’
Achieving that goal won’t be easy. The bill was already facing opposition from the decentralized finance, or DeFi, community -- a corner of the crypto market that allows participants to cut the middleman out of financial transactions. DeFi supporters had said the bill was skewed toward centralized exchanges like FTX.
The fact that Bankman-Fried, known as SBF, was so closely associated with the effort is unlikely to help the legislation advance.
“SBF was the driving force behind this bill, and I don’t think policy makers are going to want to move forward with what was his brainchild when he turned out to be the instigator of the current crisis that we have,” said Kristin Smith, executive director of the Blockchain Association, a crypto trade group.
The committee still hoped to vote on the bill sometime before year-end, said a crypto lobbyist who was skeptical of that happening. But lawmakers from both chambers are trying to understand the full details of the FTX meltdown and how to prevent a similar event, according to the lobbyist, who wasn’t authorized to discuss the matter and asked not to be identified. Forcing committee members to vote on what’s now a controversial bill puts them in a tough position, the person added.
Rushing to pass legislation also “risks laying a poor foundation for future oversight,” said Mark Hays, a senior policy analyst for Americans for Financial Reform and Demand Progress.
A spokesman for Boozman pointed to the senator’s statement on the FTX situation. Stabenow’s office didn’t immediately respond to a request for comment.
Turf Battle
The FTX fallout is giving ammunition to Securities and Exchange Commission Chair Gary Gensler and his allies in Washington to make the case that his agency should be the top watchdog of the crypto market, even as critics question whether regulators could have taken action before the FTX blowup.
“I call on Congress not to pass legislation that weakens the oversight of the securities markets and not to do something in the guise or being pro-crypto or pro-innovation that undermines investor protections,” Gensler said last week at a Healthy Markets Association event just blocks away from the Senate.
Legislation being considered by Congress doesn’t meet the test, he said.
Though the CFTC has long been seen as the preferred regulator by the crypto industry, FTX had also tried to make inroads with the SEC. The firm was exploring ways to engage with the SEC and gain a first-mover advantage in the industry by potentially registering its platform with the agency, a person familiar with the matter said in September. The SEC declined to comment.
The CFTC, however, has been perceived as the less-rigorous route when compared with the SEC’s strenuous disclosure regime. CFTC Chairman Rostin Behnam has disputed that characterization, often noting that the agency was an early mover in cracking down on crypto fraud.
Behnam said Monday at a conference in Chicago that the agency doesn’t have surveillance or market-monitoring tools when it comes to crypto, which is why the Stabenow-Boozman bill is needed.
“We have to rely on either implosions or people coming to us and saying they are seeing fraud or manipulation in the marketplace,” Behnam said. “We’re going to continue to monitor the entities we can, and other than that, I will continue to advocate for new authority.”
--With assistance from Isis Almeida, Katherine Doherty, Margaret Collins and Bill Allison.
This article was provided by Bloomberg News.