Senator Elizabeth Warren, a longtime crypto critic, has warned that the recent turmoil in the digital asset space will only continue unless a host of regulators strengthen protections for investors.
“For all their talk about innovation and financial inclusion, the giants of the crypto industry from FTX to Celsius to Voyager are collapsing under the weight of their own fraud, deceit and mismanagement,” he said.
“And when they go under, they take a lot of honest investors with them,” Warren (D-Mass.) added during remarks Wednesday at an event hosted by the American Economic Liberties Project and Americans for Financial Reform.
FTX, Celsius and Voyager filed for bankruptcy last year as asset prices plummeted and the global crypto market capitalization collapsed by roughly $2 trillion. Federal prosecutors have charged several former FTX executives, including founder Sam Bankman-Fried, with orchestrating one of the largest financial frauds in US history.
FTX’s collapse in November sparked a contagion that is still spreading through crypto markets, which remain largely unregulated and opaque.
Warren called on regulators, including the Securities and Exchange Commission and banking authorities, on Wednesday to double down on the tools they already have. They need to protect consumers, educate investors and seek “meaningful consequences” for bad actors, he said.
“Crypto fraud is a big problem, but it’s one we can fix,” Warren said.
The SEC in the past two years has gotten “off to a good start” by keeping cryptocurrency volatility out of the traditional banking system and preventing Bitcoin exchange-traded funds from reaching the market, he said. And without directly naming Bankman-Fried, Warren praised the SEC for accusing “crypto criminals” of defrauding ordinary investors.
But the SEC can’t fix everything.
“All of our regulators need to be involved,” Warren said, calling on environmental and banking officials to come forward.
“Crypto mining companies are polluting communities, overloading power grids and driving up utility costs in communities from Texas to New York,” he said. “Both the Department of Energy and the Environmental Protection Agency have the authority to require crypto miners to disclose their energy use and environmental impact. “
Warren said the rise of crypto-friendly banks has already opened the traditional banking system to greater risk, “raising the specter of a cryptocurrency crash in which American taxpayers get to keep the bag.”
“It is the job of banking regulators to insulate the banking system, and taxpayers, from the risk of crypto fraud. They have the tools and they need to use them.
Ultimately, Warren said, wherever regulators lack the authority they need, it’s Congress’s responsibility to give agencies the tools they need to enforce the rules.
In his characteristic no-nonsense tone, he acknowledged cryptocurrency advocates who have long chafed at the idea of more regulation.
Tighter regulators, he said, would give the industry a chance “to test whether it can deliver on its promises of innovation without robbing investors or laundering funds for drug dealers and terrorists.”
“No financial industry should write its own playbook: either comply with the law or face harsh consequences for violating it. Cryptocurrencies are no different.”