Senate crypto hearing yields big claims, possible regulation

Whether increased regulation would have prevented the spectacular collapse of cryptocurrency exchange FTX was fiercely debated at a hearing of the Senate’s banking committee Wednesday. However, new legislation is potentially on the way.

Sen. Elizabeth Warren announced at the hearing bipartisan legislation aimed at cracking down on cryptocurrencies being used in money laundering. The legislation, co-sponsored by Republican Sen. Roger Marshall of Kansas, would require cryptocurrency exchanges to verify customer identities like banks and other financial institutions do.

“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers and for rogue states that want to launder money,” said Warren, the Massachusetts Democrat, adding that “crypto doesn’t get a pass to help the world’s worst criminals – no matter how many television ads they run or how many political contributions they make.”

Republican Sen. Cynthia Lummis, of Wyoming, said she and Democratic Sen. Kirsten Gillibrand, of New York, would reintroduce their bipartisan legislation, the Responsible Financial Innovation Act, next year. That act would require disclosures and consumer protection obligations from cryptocurrency issuers.

Lummis, like several other Republicans on the banking committee, said the alleged financial crimes of former FTX CEO Sam Bankman-Fried should not be used to target cryptocurrency more generally.

“Let’s separate digital assets from corrupt organizations,” she said. “FTX is good old-fashioned fraud.”

However, Democratic Sen. Sherrod Brown, chairman of the Senate Committee on Banking, Housing and Urban Affairs, asked the hearing’s four witnesses – two crypto proponents and two critics – whether fraud was systemic at other firms in the industry. They all...