Another FTX-like situation is possible, said Commodity Futures Trading Commission Chair Rostin Behnam.
Behnam urged the Senate Banking Committee in December 2022 that lawmakers needed to move quickly on a regulatory approach to create guardrails and prevent risk — and, if not, said crypto would be unsafe for investors and could bring with it greater risks. Now, almost a year later, Behnam was asked by a CNBC reporter at a conference at Georgetown University whether anything has changed since then.
"Ultimately, the answer to that question is, no, nothing has changed and we could be in a position where another FTX type event happens," Behnam said on Wednesday morning.
Former FTX CEO Sam Bankman-Fried, who was found guilty on all counts for defrauding investors just a few weeks ago, caused customers to lose billions. The collapse led to major distrust in crypto from some in Congress while others pitched legislation to regulate crypto in the U.S.
Meanwhile, Behnam said crypto markets have changed dramatically since an uptick at the beginning of the pandemic and even just a year ago.
"So could an FTX type event happen?" Behnam said. "I don't want to ever say never, but certainly the market dynamics and the market environment is much different today than it was a year ago let alone two or three."
In need of a roadmap
Congress needs to create a roadmap, Behnam said on Wednesday, echoing previous comments in last year's Senate Banking hearing.
"We lacked the authority to comprehensively regulate the digital commodity market,” Behnam said in December 2022. “To prevent this from happening again, we must be provided appropriate authority by Congress."
Two bills advanced out of the House Financial Services Committee during the summer, and would still need a full vote by the House before going onto the Senate. One bill would regulate stablecoins, while the other takes a comprehensive approach at creating a regulatory framework for crypto. Even with an eventual House vote, they would still need to garner support in the Senate, which could prove to be tough. Other lawmakers have pushed for legislation to crack down on the use of crypto for money laundering and evading sanctions.
Behnam said bills, though not commenting on which specific ones, seem to be caught in a "holding pattern."
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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