US lawmaker attributes delays in legislation to 'billionaire crypto bros'

Alarm bells are ringing across Washington, D.C. following the fall of FTX.

Congressman Brad Sherman, a well-known critic of cryptocurrencies, has accused "billionaire crypto bros" of having a hand in delaying much-needed cryptocurrency regulatory measures.

In a Nov. 13 statement addressing the collapse of crypto exchange FTX, Sherman said the exchange’s implosion has demonstrated the need for regulators to take immediate and aggressive action:

“The sudden collapse this week of one of the largest cryptocurrency firms in the world has been a dramatic demonstration of both the inherent risks of digital assets and the critical weaknesses in the industry that has grown up around them.”

“For years I have advocated for Congress and federal regulators to take an aggressive approach in confronting the many threats to our society posed by cryptocurrencies,” he added.

Sherman declared his intention to collaborate with his Congress colleagues to assess possibilities for federal law, wishing to implement it without any economic influence from the individuals involved in the cryptocurrency sector:

“To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective.”

“I believe it is important now more than ever that the SEC take decisive action to put an end to the regulatory gray area in which the crypto industry has operated,” the senator added.

Sherman directly mentioned Sam Bankman-Fried, the former CEO of FTX, and his political donations to the Democratic Party, as well as Ryan Salame, the co-CEO of FTX who donated to Republicans in 2022.

Bankman-Fried reportedly donated a whopping $39.8 million to the 2022 U.S. midterm election, making him the sixth-largest contributor. He shared that the money was split between the Democratic and Republican parties.

Senator Sherman has recommended a ''aggressive approach'' for the regulation of cryptocurrencies, but Thomas Hook, the U.S. Chief Compliance Officer at the cryptocurrency exchange Bitstamp, has highlighted the need for "common sense regulation" in an interview with a website:

“Regulators are reacting to an industry that is evolving constantly but overregulation could stifle that innovation [...] poorly thought-out regulation could create a two-fold issue: first it could limit US consumers’ ability to participate in the cryptocurrency ecosystem and it could also drive these businesses to less regulated jurisdictions.”

“This actually creates more risk for customers as it puts them in a position of dealing with less regulated institutions to participate in the ecosystem,” Hook added, who is also Professor on Cryptocurrency Regulation at Boston University School of Law.

Meanwhile, in an interview with CNBC on Nov. 11, Kevin O'Leary, the host of Shark Tank and a millionaire venture capitalist, suggested that the U.S. regulators “need to start with one thing" in terms of regulation, proposing the Stablecoin Transparency Act as the best starting point.

According to O'Leary, the recent events at FTX have caused him to believe that institutional investors will likely hold off on investing ''serious capital'' into any new investments until there is an established regulatory framework.

“That would signal to everybody around the world that regulators in the United States are taking crypto on, starting to put rules in place, putting the guard rails on, no one is going to play ball in this space on an institutional level with serious capital until we get it done.”

Notable cryptocurrency bills that have been introduced in U.S. Congress include the Central Bank Digital Currency Study Act of 2021, the Digital Commodities Consumer Protection Act of 2022 (DCCPA), the Stablecoin Transparency Act, and the Cryptocurrency Tax Clarity Act. 

President Joe Biden's March 2022 executive order will be the focus of upcoming bills, with a view to protecting consumers and investors, maintaining financial stability, preventing illicit finance, and enhancing the United States’ status within the global finance sector, as well as promoting financial inclusion and responsible innovation.