November 30, 2022

Senate Banking Committee Chair Calls for Coordinated Effort on Crypto Regulation

Senate Banking Committee Chair Sherrod Brown (D-OH) urged regulators to work with one another as well as with Congress on a coordinated approach to crypto regulation.

In a letter to Treasury Secretary Janet L. Yellen, Senator Brown said that the collapse of FTX highlighted many of the underlying risks in crypto-asset markets, and emphasized the need to quickly contain the fallout to avoid it spilling over into any traditional financial markets. Senator Brown said that FTX "failed to exercise basic corporate controls or risk management over its operations[,]" drawing parallels to the collapse of institutions like Lehman Brothers and more recently Archegos Capital Management and their effects on the rest of the market.

Senator Brown urged regulators to accept the recommendations outlined in the Financial Stability Oversight Council's October 2022 report on digital asset financial stability risks and related regulation. Specifically, he said that regulators should address concerns relating to (i) vertically integrated market structures and platforms, (ii) opaque affiliated transactions, (iii) fragmented and illiquid trading markets and (iv) an overdependence on leverage. Senator Brown urged regulators to continue to enforce existing laws and work to standardize regulation to avoid regulatory arbitrage.

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