WATCH: Commodity Futures Trading Commission chairman ask Congress to ‘move quickly’ on crypto bill
The U.S. Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam urged Congress to put in place “guardrails” for digital assets following the collapse of cryptocurrency exchange FTX.
Watch the hearing in the player above.
“I strongly believe that we need to move quickly on a thoughtful regulatory approach to establish guardrails in these fast-growing markets of evolving risk. Or they will remain an unsafe venture for customers and could present a growing risk to the broader financial system,” Behnam said Thursday before a hearing by the Senate Agriculture committee.
The Senate Agriculture Committee says it is critical to move ahead with legislation geared to regulate cryptocurrencies to prevent further failures from the industry.
The committee’s Chairwoman Debbie Stabenow (D- Mich.) said that last month’s collapse of digital-asset exchange FTXwas brought on by the absence of “rules” that safeguard customer assets.
In her opening remarks, Stabenow said: “The lack of clear, consistent rules has allowed crypto to flourish despite the harmful conflicts of interest and absence of responsible governance and risk management and a failure to safeguard customer assets, she said.
Stabenow pointed to reports that FTX failed in the cryptocurrency version of a bank run when customers tried to withdraw their assets all at once because of growing doubts about the financial strength of the company and its affiliated trading arm, Alameda Research.
She said, “When exchanges accept customer funds for trading, they must not be allowed to gamble with those funds. They must not be allowed to invent products that have little or no intrinsic value and accept them as collateral for loans and they must not be allowed to self-deal.”
Exchanges like FTX are supposed to segregate customers’ deposits from any bets they place in the markets.
Other financial companies have gotten into legal hot water for misusing customers deposits, one example being MF Global roughly 10 years ago.
In his testimony, Behman, whose agency regulates U.S. derivatives markets, including futures, swaps, and other kinds of options told lawmakers the CFTC is halted by its failure to register cash market exchanges.
“That’s what concerns me. This is the gap that exists,” he said.
Adding,”If we don’t do something, customers will continue to lose money and we’re going to be right back here in a couple of months.”
Behnman also informed lawmakers he had met with former FTX chief executive officer Sam Bankman-Fried 10 times to discuss the company’s application to directly clear its customer’s trades.
The former CEO of the failed cryptocurrency exchange FTX said Wednesday that he did not “knowingly” misuse customers’ funds, and said he believes his millions of angry customers will eventually be made whole.
The comments from Sam Bankman-Fried came during an interview with Andrew Ross Sorkin at a conference put on by The New York Times.
Bankman-Fried has done a handful of media interviews since FTX collapsed in mid-November, but Wednesday’s was his first video interview since it filed for bankruptcy protection on Nov. 11.