Following the news that Binance will acquire FTX.com due to liquidity problems, Congressman Patrick McHenry, the ranking Republican member on the House Committee on Financial Services, has issued a statement that there is a need for Congressional action.
McHenry has long been supportive of Fintech in general, including the emerging digital asset ecosystem. The Representative has been working with other members on various bills aiming to provide greater regulatory clarity for the crypto sector. If the House flips to the Republicans as is expected, McHenry will become the Chairman of the House Financial Services Committee, thus becoming well-positioned to push through crypto legislation.
McHenry stated:
“For years, I have advocated for Congress to develop a clear regulatory framework for the digital asset ecosystem, including trading platforms. The recent events show the necessity of Congressional action. It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here in the US I look forward to learning more from FTX and Binance in the coming days about these events and the steps they will take to protect customers during the transition.”
The rapid deterioration of FTX following an article that questioned its relationship with Alameda Holdings, a crypto trading platform controlled by FTX CEO Sam Bankman-Fried, and its holdings of FTT (FTX native token) rattled the entire crypto market. Effectively, a run on the bank occurred, creating a liquidity panic and solvency concerns. In the end, a shotgun wedding took place, and Binance stepped in to take over FTX, thus calming markets.
Bankman-Fried, a regular suspect on Capitol Hill, had been viewed as a savvy and dependable player in the crypto-verse. His perspective on digital assets was sought after and well respected. But the lack of transparency and questionable operations of FTX.com and Alameda has, once again, increased concerns about the overall fragility of crypto markets. Most certainly, it will incentivize crypto detractors in both the House and the Senate.
While this crisis may pass, the crypto industry has earned a reputation for lurching from one crisis to another, a hack to a failure. The demise of TerraUSD, an aspiring algorithmic stablecoin that ended up being not so stable, is still part of recent memory.
If the crypto industry is going to thrive, it must aggressively pursue higher operational standards and far greater transparency while working with policymakers to craft prudent rules for the industry.