Lawmakers want SBF to testify as FTX's collapse puts crypto regulation in the spotlight

Thursday, November 17, 2022 by Robinhood Snacks |

Place your right hand… on the crypto white paper? Sam Bankman-Fried has been called to testify. The House Financial Services Committee said the FTX founder is expected to speak to lawmakers next month about his now bankrupt exchange's spectacular collapse. SBF was a regular on Capitol Hill, lobbying for centralized-exchange-friendly regulation. He spent $40M in the last election cycle, mostly on Democratic candidates and causes. Now the so-called wunderkind could be forced to explain how customer funds disappeared (reportedly up to $2B):

  • FTXtradition: American and Bahamian law enforcement (FTX is Bahamas-based) are said to be in talks to bring SBF to the US for questioning — separate from the House hearing.

Mr. SBF goes to Washington… but this time he’s in the hot seat. Before FTX imploded, lawmakers had been working on the SBF-favored Digital Commodities Consumer Protection Act (DCCPA). The bipartisan bill would give commodities regulators (aka: the CFTC) additional crypto oversight. But critics said it would prop up centralized exchanges like FTX while hurting decentralized ones like Uniswap. Now the bill's future is in doubt:

  • SB-effed: The Blockchain Association, a crypto trade group, said the DCCPA has SBF's stink on it, and predicts elected officials will want to distance themselves. And yet…
  • Better than nothing: Sens. Debbie Stabenow and John Boozman, the bill's backers, are doubling down, saying FTX's fall hastens the need for regulation.

The sunk-cost fallacy is a powerful motivator… and so is embarrassment. FTX's bankruptcy left elected officials in an awkward position: do they push forward regulation once championed by crypto's now “villain” du jour, or walk away from months of efforts only to start anew? Stabenow and Boozman have chosen the latter. Meanwhile, Binance’s CEO is also calling for regulation — just not through the DCCPA.