FTX’s bankruptcy shows the need for crypto regulation, Elizabeth Warren warned Tuesday. “FTX’s implosion should be a wake-up call. Regulators must enforce the law before more people get cheated,” she said. Warren criticized crypto’s usage in money laundering and its high environmental cost. Loading Something is loading.
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FTX’s sudden implosion shows there’s a need for proper crypto regulation before digital assets cause wider economic damage, according to Elizabeth Warren.
The Massachusetts senator said Tuesday that financial watchdogs need to intervene in the space to protect retail investors, after the sudden collapse of Sam Bankman-Fried’s exchange erased at least $1.7 billion in customers’ funds.
“FTX’s implosion should be a wake-up call,” she wrote in a Wall Street Journal op-ed. “Regulators must enforce the law before more people get cheated, and Congress must plug the remaining holes in our regulatory structure — before the next crypto catastrophe takes down our economy.”
FTX filed for bankruptcy last week after rival exchange Binance marked down its holdings of the group’s FTT token, sparking a solvency crisis.
FTX’s new CEO John Ray III said in a Chapter 11 filing published November 17 that the group’s total crypto holdings had been worth just $659,000, rather than the $5.5 billion claimed by Bankman-Fried – and that he had “substantial concerns” over their financial statements.
Warren compared last week’s events to the 2008 financial crisis, saying that crypto is “following a well-worn path of financial innovations, such as subprime mortgages and credit-default swaps, that began with dazzling rewards and ended with crippling losses.”
As well as protecting retail investors, Warren also wants to see crypto regulation crack down on money laundering. According to Warren, terrorists, drug dealers and ransomware criminals can “hide their illegal activities by trading billions of dollars of cryptocurrencies with complete anonymity.”
She also wants to see a reduction in the industry’s high pollution levels: “Crypto-mining firms polluting and straining power grids should be required to disclose their emissions and energy consumption to the public. The Energy Department has the tools to require these disclosures, but if it’s unwilling to use them, Congress should step in.”
Read more: FTX’s bankruptcy filings show the situation is much worse than anyone thought. From a million creditors to a stunning lack of oversight, here are the craziest details.