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Last year, seeing FTX join the long list of crypto companies shut down during the 2022 “crypto winter,” underscoring the urgent need to protect the economy from harmful practices by the crypto industry. rice field. These collapses cost investors trillions of dollars and disproportionately hurt low-income, Latino, black, and first-time investors. Amid FTX’s bankruptcy filing, the company’s interim CEO James Ray, tasked with cleaning up the chaos caused by disgraceful founder Sam Bankman-Fried, described the kind of “corporate management that we’ve seen at FTX”. “A complete failure,” he said. Unfortunately, the lack of corporate control he shows is not just about FTX, but the industry’s refusal to comply with existing regulations.
To prevent further collapse, companies issuing cryptocurrencies, cryptocurrency exchanges, and other related companies must comply with existing securities laws. It includes proven provisions to ensure investors and markets are protected from bad actors.
According to SEC Chairman Gary Gensler and recent court rulings, the majority of crypto assets are securities because they meet the Howie test, or framework set by the U.S. Supreme Court. According to the Howey Test, an entity is a security if an investment contract exists. An investment contract exists when money is invested in a common enterprise in anticipation of profits arising from the work of others. I agree with Chairman Gensler that “there is nothing about the cryptocurrency market that is incompatible with securities law” and that “investor protection is equally important, regardless of the underlying technology”. If a cryptocurrency company complies with existing laws, it cannot engage in harmful practices such as misusing customer funds, offering sweet deals to friends, or laundering money.
The cryptocurrency industry obscures laws by using courts to challenge regulatory attempts and lobbying for regulatory carve-outs that benefit them at the expense of everyday people. Famous for trying Most recently, Binance, the world’s largest cryptocurrency exchange, reportedly lobbied the Department of Justice (DOJ) to stop its actions against the company. Some cryptocurrency companies also use celebrity endorsements, philanthropy, political contributions, and innovation claims to evade scrutiny, garner public favor, and frame the industry as credible.
There is nothing revolutionary in how FTX and other cryptocurrency actors have replicated the worst trends of Wall Street and Big Tech. They have recreated many elements of his 2008 financial crisis, centralizing wealth and power at the top, exposing investors to incredible volatility and preying on consumers. True innovation must foster financial stability and inclusion.
The American people cannot afford to repeat the economic collapse caused by greed and corporate malfeasance. Policy makers must protect the economy from bad actors by encouraging the crypto industry to comply with existing laws, invest in truly innovative solutions, and create a more inclusive financial system. .
Jesús “Chuy” García represents District 4 of Illinois. Stephen F. Lynch represents the Massachusetts 8th District. Both are members of the Financial Services Committee of the United States House of Representatives.
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