Lawmakers Continue to Argue Over ‘Crypto Nightmare’

Lawmakers and experts met in Washington, DC today to discuss how to better regulate the fast-moving and complex world of cryptocurrency — but didn’t really come up with any solid solutions.

The Senate Banking Committee on Housing and Urban Affairs hosted a meeting Tuesday titled “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” where some experts said it would be best to let the industry flourish and allow innovation.

But others were more hostile to crypto, warning of the risks the digital asset world poses to traditional finance.

“This crypto nightmare is not over yet – we are still learning the full extent of the fallout from the FTX collapse,” Sherrod Brown (D-Ohio) said in his opening remarks, calling for strict regulation after the fall of mega-exchange FTX last year.

FTX’s bankruptcy last year has effectively evaporated billions of dollars of customers’ cash.

The Bahamas-based company went bankrupt because it used client money to make risky investment bets through the trading firm Alameda Research, prosecutors allege – and its former boss and co-founder is now faces eight charges.

FTX’s spectacular collapse has lawmakers and experts scrambling to figure out how to regulate the industry more than ever — but for different reasons.

At today’s hearing, long-time crypto critic Senator Elizabeth Warren (D-Mass.) talked about how criminals like “drug kingpins” used digital assets.

Lee Reiners, policy director of the Duke Financial Economics Center, said the crypto world bore little resemblance to what Bitcoin creator Satoshi Nakamoto envisioned and “undermined” US national security.

“14 years have provided ample evidence of the great harm cryptocurrency is inflicting on our society,” he said.

Others called for regulation, but stressed that the technology should be allowed to grow. Georgetown Law Professor Linda Jeng said crypto could have helped her move her savings overseas if she had known how to use the right apps.

And Sen. JD Vance (R-Ohio) — who admitted to owning crypto — said regulators want to make sure they don’t “destroy the dynamic upside” of the digital asset world.

Regulators have taken a tougher stance on crypto recently: SEC hit The US crypto exchange Kraken with a fine of 30 million dollars last week for violating securities laws.

SEC Chairman Gary Gensler was not present at today’s meeting, and lawmakers noted that the top regulator should attend the committee’s next hearing.