- On Tuesday, Elizabeth Warren warned that the bankruptcy of FTX showed the need for regulation of cryptocurrencies.
- “The crash of the FTX should be a wake up call. Regulators need to enforce the law before more people are scammed,” she said.
- Warren criticized the use of cryptocurrencies for money laundering and its high environmental costs.
According to Elizabeth Warren, the sudden collapse of FTX shows the need for proper regulation of cryptocurrencies before digital assets cause wider economic damage.
The Massachusetts senator said on Tuesday that financial watchdogs must intervene to protect retail investors after the sudden crash of the Sam Bankman-Freed exchange wiped out at least $1.7 billion in client funds.
“The FTX explosion should be a wake up call,” she wrote in a Wall Street Journal article. “Regulators must enforce the law before more people are scammed, and Congress must close the remaining holes in our regulatory structure—before the next crypto disaster devastates our economy.”
FTX filed for bankruptcy last week after rival exchange Binance lowered its holdings in the group’s FTT token, triggering a solvency crisis.
New FTX CEO John Ray III said in a Chapter 11 statement released Nov. 17 that the group’s total cryptocurrency holdings are only $659,000, rather than the $5.5 billion announced by Bankman-Freed, and that he has “substantial concerns about their financial statements. .
Warren compared last week’s events to the 2008 financial crisis, stating that the cryptocurrency is “following the beaten track of financial innovations such as subprime mortgages and credit default swaps that started with dazzling rewards and ended with crushing losses.”
In addition to protecting retail investors, Warren also wants cryptocurrency regulation to stop money laundering. According to Warren, terrorists, drug dealers, and extortionate criminals can “hide their illegal activities by trading billions of dollars worth of cryptocurrencies with complete anonymity.”
She also wants the industry to reduce high levels of pollution: “Firms that mine cryptocurrencies, pollute the environment and put pressure on the power grid, should disclose to the public information about their emissions and energy consumption. if he does not wish to use them, Congress must intervene.”
Read more: FTX’s bankruptcy filings show the situation is far worse than anyone thought. From a million creditors to a staggering lack of oversight, here are the craziest details.