Senate Banking Committee Chairman Sherrod Brown calls for crackdown on cryptocurrencies

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WASHINGTON, DC As chairman of the U.S. Senate Banking, Housing, and Urban Affairs Committee, Ohio Democrat Sherrod Brown sounded the alarm on cryptocurrency more than a year before the November meltdown from the FTX cryptocurrency exchange.

There’s nothing democratic or transparent about a sleazy, pervasive network of online play money, Brown warned during a July 2021 hearing on alternative currencies, which proponents argue are a way to regain power from the irresponsible Wall Street bankers who triggered the 2008 global financial crisis.

Cryptocurrencies are not backed by governments, banks or other institutions. Their ownership is tracked through decentralized computer networks based on blockchain technology. There are thousands of different types of cryptocurrency, and their values ​​can fluctuate widely. Hackers have stolen billions of dollars in digital funds.

Previously valued at $32 billion, FTX was forced into bankruptcy after a run on filings left it with an $8 billion shortfall, causing huge losses for investors who trusted it. exchange with their money. The race was sparked by a report questioning the stability of an affiliate, Alameda Research, whose finances are tied to FTX.

Brown called the collapse a loud wake-up call that cryptocurrencies can fail, and just as we’ve seen with OTC derivatives that led to a financial crisis, those failures can have an effect. ripple effect on consumers and other parts of our financial system. He asked Treasury Secretary Janet Yellen and other federal financial regulators to consider how to regulate cryptocurrencies and their role in the US economy.

A letter he wrote to Yellen observes that FTX has failed to exercise basic corporate controls or risk management over its operations and has unduly relied on its own proprietary crypto tokens, which has led to inflated valuations that fueled irresponsible risk-taking. Citing a Financial Stability Oversight Council report that found crypto-asset activities could destabilize the U.S. financial system if they grow unregulated, Brown urged Yellen to work with him and other financial regulators to craft comprehensive cryptography legislation.

Over the past year, the Browns Committee has held hearings on the risks of stablecoins, the role of cryptocurrencies in illicit finance, and crypto scams and fraud. The regulations he envisions would prioritize national security and consumer and national interests over the crypto industry, he says.

Crypto firms and their backers have argued that billions of dollars invested in lending programs or returns should be exempt from basic oversight and regulatory protections, Brown told a Dec. 14 hearing. on the collapse of FTX. That’s not how regulation works. Things that look and behave like securities, commodities or banking products need to be regulated and supervised by responsible bodies that serve consumers.

The weekend after the hearing, he told NBC Chuck Todd that the cryptocurrency ban would be possible, but very difficult because it will go overseas and who knows how that will work out.

According to charts from Open Secrets, a nonprofit group that tracks money in politics, FTX founder and former chief executive Sam Bankman-Fried and his top executives have made more than $70 million in contributions federal policies during the last election cycle. Bankman-Fried says he gave equal amounts to Republicans and Democrats, telling a reporter that to avoid media criticism, he gave all his money to Republicans through black money groups that don’t demand of disclosure. FEC records do not show that money went to Brown or his America Works political action committee.

In an interview, Brown said investors in Ohio and elsewhere have lost a lot of money to cryptocurrency.

People went in there unknowingly, not trusting the banking system, and there’s nothing in crypto to protect them, Brown said.

In addition to the lack of basic investor protections and consumer oversight, Brown warned that cryptocurrency puts the economy and national security at risk.

We’ve seen crypto money launderers, gun runners, drug dealers and rogue regimes invent new ways to hide and move money, Brown said. FTX’s recent implosion is a warning, but it’s not just limited to FTX. It’s an industry-wide issue, potentially, that can hurt this economy, not just investors but the economy as a whole and we need to make sure it doesn’t come to that.

Brown says US financial markets are the envy of the world because of the way they protect Americans’ money, not despite it.

Supposed innovation and opportunity mean little if it comes at the cost of massive fraud, Brown says. New ways to cheat people with their money is not the kind of innovation most people want in our economy.

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