Crypto is Pushing Back Against FTX-Fueled Criticisms
From day one of the FTX collapse going public, we’ve been saying that this fiasco would draw all the wrong critics out, and we were right on the money. But finally the industry is pushing back, and people are starting to support our narrative that crypto didn’t fail, FTX and the regulatory regime failed.
From The Block, there’s increasing scrutiny on the failure of the US Securities and Exchange Commission, and crypto advocates in Congress are going to bring down the hammer in upcoming hearings, focusing on SBF’s sweetheart involvement with SEC Chair Gary Gensler.
After the high-profile implosion of FTX, crypto skeptics and digital currency advocates have both asked the question: Could the Securities and Exchange Commission have done more?
Expect to hear that question more from Congress.
Asked if the SEC could have been more aggressive in investigating FTX prior to a bankruptcy process that could potentially affect hundreds of thousands of consumers, New Jersey Sen. Bob Menendez, a senior Democrat on the Senate Banking Committee, replied simply, “Yes.” Asked if he planned to question SEC Chair Gary Gensler about that, Menendez replied, “I am.”
On the other side of the Capitol, Rep. Tom Emmer, R-Minn., the soon-to-be number-three Republican in the House of Representatives, has echoed criticism from members of the decentralized finance community over Sam Bankman-Fried’s lobbying of the SEC for a no-action letter request that was not granted.
“What involvement did he have with the SEC and others? I think we’ve got a lot of questions,” Emmer told The Block.
Meanwhile, crypto opponent US Sen. Elizabeth Warren, D-Mass., is getting an earful form the industry after her alarmist screed in the Wall Street Journal yesterday, which charged crypto will “bring down the economy.” She compared the innovative crypto industry to toxic mortgage-back securities which lead to the subprime crisis in 2008, penny stocks and credit default swaps.
The dramatic collapse of Sam Bankman-Fried’s crypto exchange, FTX, may have come as a shock to the Miami Heat, Tom Brady, Twitter bots and financial-news talking heads. But crypto is following a well-worn path of financial innovations, such as subprime mortgages and credit-default swaps, that began with dazzling rewards and ended with crippling losses.
Proponents say crypto holds great promise for making the financial system more efficient and inclusive. Maybe. But we’ve heard that story before. History is littered with financial schemes promoted by criminals and charlatans who claimed that the latest and greatest tools had evolved beyond the need for regulation or a cop on the beat. During the 2008 collapse and every financial crisis before that, these claims have proved dangerously delusional. Crypto is no exception.
This didn’t go well in the crypto space. Binance co-founder and CEO Changpeng “CZ” Zhao, also addressed Warren, saying risk goes hand in hand with progress.
Some (including me) say this will "set the industry back a few years." But thinking about it, this is natural. There will be failures with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will recover quickly, and become stronger. — CZ Binance (@cz_binance) November 23, 2022
Others pointed out Warren’s dilettante-level understanding of the industry.
Centralized exchanges for crypto are a far cry from crypto the technology. Know the difference and only regulate the centralized exchanges. The risk is the centralized exchanges, not the crypto and not decentralized exchanges/finance. Crypto did not fail. SBF failed. SEC failed. — Steve Westhoff (@SteveWesthoff) November 22, 2022