They used the following debacle as leverage to argue that the cryptocurrency business needs to be regulated in a more stringent fashion. Several authorities were quite loud about the status of the market and how investors are suffering, particularly those investors who have suffered as a result of the rapid decline of FTX.

A significant number of MPs have argued that there is an immediate need for a regulatory framework for the cryptocurrency industry.

Regulation

It had appeared like Binance may purchase FTX before things grew so complicated, which prompted a comment from Congressman Patrick McHenry. FTX is a cryptocurrency exchange.

The top Republican, who is also a member of the House Financial Services Committee, has stated that there is a requirement for regulating crypto assets.

He stated that the need for action by Congress was fairly clear in recent occurrences and that Congress should build a framework to ensure that people have proper protection when they are in space. He also stated that the necessity for action by Congress was extremely apparent in recent events.

On Thursday, Maxine Waters, who is the chairwoman of the committee, shared similar worries that she had regarding the cryptocurrency business.

She implied that if there had been any kind of federal regulation in place at the time, they might have been able to avert the large amount of damage that was incurred by investors.

protection for investors

According to her, it had become clear that the repercussions of crypto firms operating without any regulatory monitoring might have devastating results since there are no protections for users. She said this became clear because there was no regulatory oversight.

Sherrod Brown, who is the leader of the Banking Committee, stated that the failure of the FTX exchange ought to be investigated by financial watchdogs in order to understand precisely how the cash of clients were mismanaged.

The collapse of the FTX exchange was cited by the senator from the United States as an indicator that there is a possibility of failure. He went on to say that the instability that has been occurring in the cryptocurrency market demonstrates that cryptocurrencies need to be controlled, and that their place in the economy has to be decided.

Insufficient clarity

According to Brad Sherman, who is the head of the committee on investor protection, the primary reason why the FTX situation was so disastrous was because there is no clarity when it comes to regulations for cryptocurrencies such as bitcoin and ether.

According to the congressman, some of the blame for this situation lies with the Securities and Exchange Commission (SEC). He stated that the Securities and Exchange Commission (SEC) needs to take decisive action because there are still some ambiguous situations in the cryptocurrency market.

He went on to say that the efforts of billionaire crypto entrepreneurs to prevent meaningful legislation by spending millions of dollars on lobbying and making campaign contributions have been quite successful.

Senator Patrick Toomey shared similar sentiments, stating that there needs to be a transparent regulatory framework. In the past, he has been critical of the SEC for their approach to regulation in the cryptocurrency space, which is to use enforcement as their primary strategy.

According to him, the incident with FTX demonstrates the importance of having a proper regulatory framework, which should include the separation of customer funds by centralized exchanges.

Since the collapse of the Terra ecosystem in May, the SEC has been the target of criticism on multiple occasions, and it does not appear that anything has changed.

Because there is a lack of clarity regarding the regulatory landscape, people have begun to express concern regarding other cryptocurrency exchanges that are currently operating in the market.