Crypto exchanges Binance.US and Coinbase are among the cryptocurrency firms questioned by U.S. Senator Rob Wyden following the FTX debacle. The motive was to determine how they protect the investors using their services in light of the widespread catastrophe caused by the FTX implosion.
The news comes after Senator Ron Wyden (D-Ore) sent six letters to giant crypto firms- including Binance.US, Coinbase (COIN), Bitfinex, Gemini, Kraken, and KuCoin, asking them to explain the structure of their operations. In the letter, Senator Wyden wanted to know whether the named firms “separate customers’ assets from their own and how they guard against market manipulation and internal conflicts of interest.”
Senator Wyden to Focus on Consumer Protection
In the letter dated November 28, 2022, Senator Wyden, who also serves as chairperson of the Senate Finance Committee, said, “As Congress considers much-needed regulations for the crypto industry, I will focus on the clear need for consumer protections along the lines of the assurances that have long existed for customers of banks, credit unions, and securities brokers.”
According to Wyden, if these protections had been in place before the FTX crisis hit, the number of retail investors facing “precipitous financial harm today” may have been significantly reduced.
The U.S. Senator also used the letter to request balance-sheet information and explanations for the individual reserves of the six companies, including whether they are audited. If so, audit reports would also have to be submitted.
It is unlikely, however, that the companies will provide their respective detailed financial data, for one, because most of them are private while two are based out of the U.S. Nevertheless, the Senator’s request underlines the possible approaches by Democratic lawmakers to the crypto industry as preparations for the next Congressional gathering start in a month.
While the Senatorial committee led by Wyden is not crucial to some of the main regulatory questions facing the crypto industry in the U.S., Wyden’s authority over tax issues could influence the matter.
In the past, the Oregon senator was critical of crypto miners, continuing his oversight of the Opportunity Zone program. The program was designed to meet specific goals defined by Republicans around encouraging investment and creating jobs in low-income communities. In that endeavor, Wyden pressed crypto firms Argo Blockchain and Redivider Blockchain, as well as a Certified Public Accountant involved in cryptocurrency transactions, Mr. Blake Christian, about their alleged moves to take advantage of the Opportunity Zone program for tax evasion without significantly benefitting low-income communities.
In 2021, Senator Wyden also shook the industry with his efforts pushing for crypto-friendly changes to the infrastructure bill. While the proposal for amendment received massive support, the White House and the Treasury Department were not on board. Still, Wyden did not succumb but backed a rival amendment by Warner-Portman-Sinema to offer certain exemptions for mining and hardware wallet providers.
U.S. Senators Probing FTX
Following the stunning collapse of FTX in November, questions about what swept the once-mighty exchange flat continue to swirl – and lawmakers want answers. So far, several U.S. Senators have already begun probing FTX, including Senators Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), and Richard Durbin (D-Ill.).
The probe began last week with the three Democratic senators sending letters to FTX’s current and former CEO, John Ray III, and Sam Bankman-Fried, demanding answers about what went wrong at the collapsed exchange. In the Committee’s opinion, the FTX bankruptcy “appears to be an appalling case of greed and deception.”
The legislature is therefore calling for accountability, saying “those responsible for being held accountable for their roles in the collapse of crypto exchange FTX.”
The letter was cc’d to the U.S. Department of Justice, U.S. Securities, and Exchange Commission (SEC) Chairman Gary Gensler, and the Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam- the three United States agencies that are investigating FTX.
