As the United States comes spinning out of the Thanksgiving holiday, the fallout from crypto exchange FTX’s implosion continues and another week of drama unfolds for the blockchain technology industry in D.C. and elsewhere.
Where we are….
SBF to speak on Wednesday
The NY Times Dealbook Summit, which is guided by DealBook reporter and CNBC anchor Andrew Ross Sorkin, will include – incredibly – a “live” interview with Sam Bankman-Fried (SBF). The FTX founder announced in a tweet that he’ll be speaking on Wednesday -via video from the Bahamas.
Bankman-Fried’s appearance will come in the wake of last week’s FTX bankruptcy hearing where new CEO John Jay Ray III said that “the mess at FTX was the worst he had seen in his career,” and that included the bankruptcy of notorious energy, trading and services company Enron says The New York Times.
Meanwhile, SBF published a note on an internal FTX Slack channel suggesting that he reluctantly caved into “coordinated” pressure to file for bankruptcy.
Thursday: Senate Ag hearing
On Thursday, December 1 at 10 a.m., the first hearing on the FTX debacle will begin on Capitol Hill courtesy of the Senate Agriculture Committee. Watch the live video of “Why Congress Needs To Act: Lessons Learned From The FTX Collapse” here.
According to a news release, the focus of the Senate Ag hearing will be the testimony of CFTC Chair Rostin Behnam. But, the questions, comments and general tone from Chairwoman Debbie Stabenow (D, MI) and Ranking Member John Boozman (R, AR) during the course of the hearing should also provide guidance on future prospects for their previously much heralded, and now limping, Digital Commodity Consumer Protection Act (DCCPA).
The legislation, which had significant input from FTX CEO Sam Bankman-Fried, may need resuscitation given the swirl of questions created by Bankman-Fried’s alleged fraud as well as influence he tried to generate through Democratic campaign donations. FTX co-CEO Ryan Salame has also reportedly given millions to Republican campaigns.
Not Thursday, now 2023
Politico had scheduled a “Crypto Summit” in D.C. on December 1 which was to include Senator Cynthia Lummis (R, WY) and Senator Kirsten Gillibrand (D, NY) who are championing their Responsible Financial Innovation Act (RFIA).
But news events and Capitol Hill priorities appear to have changed things as the publication announced “we have made the decision to postpone the program until 2023.” Binance had been the sponsor of the event – the same company which had tentatively offered to buy FTX as it was imploding but then backed out.
Politico’s Crypto Summit program had been launched in late October before the FTX collapse. The producer, sponsor and participants likely noted the “bad look” -let alone the Senate Ag Committee’s hearing is to commence on the same day.
HFS announcement this week?
Meanwhile, on the House Financial Services Committee, Chairwoman Maxine Waters (D, CA) and Ranking Member Patrick McHenry (R, NC) have promised “in December” a hearing on FTX in front of their committee. The question is… who is going to testify – Bankman-Fried? – other FTX employees? – regulators? And finally, will Waters be compelled to use subpoenas to bring witnesses to D.C.?
It would seem the House Financial Services Committee will want to make this hearing happen sooner rather than later even though – given the scope of the collapse and its residual effects – more hearings will likely seep into the next Congress with Rep. McHenry taking over the Chair.
And what about next steps for stablecoin legislation by the Committee?
UPDATE on 11/28: “Tuesday, December 13 at 10 a.m. ET: The full Committee will convene for a hybrid hearing entitled, ‘Investigating the Collapse of FTX, Part I.'” See full list of House Financial Services December hearings here.
More bankruptcies may be imminent
Genesis, Grayscale Investments and mining company Foundry, which are subsidiaries of crypto holding company Digital Currency Group (DCG), appear to be teetering on the edge of solvency due to effect of the FTX collapse. Debts in the hundreds of millions of USD may force DCG to let one or more of its subsidiaries go under in the near future. More news this week is likely.
Crypto prices are stable-ish
As of publication, the price of Bitcoin and Ethereum have maintained their US dollar valuations at approximately $16,000 and $1,200, respectively, since the FTX news leaked and the crypto crash ensued on November 7-9.
Each of the cryptos have cratered from 52-week highs set a little over a year ago when Bitcoin reached over $68,000 and Ethereum reached $4,800+. Any more FTX contagion fallout, tax loss harvesting and bearish regulatory news could drive prices lower into year-end and beyond.
Hot off the presses
The Congressional Research Service (CRS) published two new pieces on crypto recently (below). In the FTX implosion research published on November 17, CRS identifies issues for the United States regardless of any jurisdiction question:
“…the events at FTX are relevant because they shine a light on practices by U.S.-based exchanges that may be of interest to Congress. The first is whether these firms, which face fewer regulations than traditional securities exchanges and operate as both exchanges and broker-dealers, face a conflict of interest. Moreover, unlike traditional brokers, which must segregate customer funds, crypto exchanges may have comingled funds, which could make it difficult for customers to recover funds if the exchange were hacked or went bankrupt.”