US Senate will check connection between banks and crypto firms
2022.12.08 13:34
US Senate will check connection between banks and crypto firms
Budrigannews.com – In the wake of FTX’s demise, two senators from the United States have urged the heads of federal financial regulators to address “ties between the banking industry and cryptocurrency firms.”
Senators Elizabeth Warren and Tina Smith, both members of the Senate Banking Committee, acknowledged in letters dated December 7 to Federal Reserve chair Jerome Powell, acting Comptroller of the Currency Michael Hsu, and acting chair Martin Gruenberg of the Federal Deposit Insurance Corporation that the crypto industry was not sufficiently “deeply integrated” with traditional financial institutions to have a significant impact on markets following FTX’s bankruptcy filing. However, the two lawmakers cited reports that suggested ties between FTX and Moonstone Bank, based in Washington, and Tether, a stablecoin issuer, and Deltec Bank, based in the Bahamas, with no apparent oversight from federal regulators.
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According to Warren and Smith, “FTX’s collapse shows that crypto may be more integrated into the banking system than regulators are aware.” This is despite the fact that the banking system has been relatively unaffected by the most recent crypto crash.
The senators asked Powell, Hsu, and Gruenberg for a list of banks regulated by the agencies that are currently involved in crypto-related activities and information on whether the regulators planned to examine crypto firms’ connections to banks. Likewise, Warren and Smith scrutinized the heads with respect to whether FTX might have involved client assets to put more than $11 million in Moonstone, setting a Dec. 21 cutoff time for replies.
Following FTX’s bankruptcy filing on November 11, Warren has written several letters about investigations. Together with other members of Congress, the Massachusetts senator has requested that the Department of Justice hold executives at FTX accountable “to the fullest extent of the law,” that Silvergate Bank provide details on its relationship with FTX entities in response to allegations about its business practices, and that FTX CEO Sam Bankman-Fried provide answers.
A hearing on “why the FTX bubble burst” has been scheduled for December 14 by the Senate Banking Committee, and chair Sherrod Brown has threatened to issue a subpoena for Bankman-Fried if he does not testify on his own. The House Financial Services Committee set a date for a similar investigative hearing on December 13 and this was the third hearing announced by various committees with the Senate and House of Representatives.
