U.S. Rep. Ritchie Torres of New York has introduced two bills that would create new guardrails for cryptocurrency exchanges as a response to the collapse of the FTX exchange.
The legislation, introduced Friday, would prevent crypto exchanges from lending their customers’ money without their consent, and would require some exchanges to disclose to the government the size of their assets and liabilities.
The legislation is part of a broader push in Washington to reckon with the disaster at FTX, which may owe money to more than 1 million people after filing for bankruptcy last month.
Torres, a Bronx Democrat, was set to announce his bills at a news conference on Monday, according to his office.
He said in an interview that lawmakers must translate the “lessons learned from the FTX failure into common sense regulations.”
Investment documents showed FTX held about $900 million in liquid assets and had about $9 billion in liabilities the day before it fell into bankruptcy, the Financial Times reported last month.
“The FTX balance sheet was largely made up of Monopoly money printed out of thin air,” Torres said Friday. “A crypto exchange that holds customer deposits should be required to publish proof of both assets and liabilities.”
He said he was introducing his legislation as its sole lead, and would begin to enlist support. “There’s a bipartisan recognition that the FTX collapse was preventable,” Torres said.
Crypto is a foggy and largely unsupervised frontier in the financial world, and officials had been pushing for increased regulation long before the fall of FTX.
A Senate bill introduced in August would give the Commodity Futures Trading Commission power to regulate so-called digital commodities, including crypto exchanges like FTX.
In March, Torres embraced crypto in an opinion piece in the Daily News, but also called for a “comprehensive regulatory framework.”
On Friday, he said he remained optimistic that crypto technology has the potential to create “a better, cheaper and faster payment system,” but that the FTX debacle had underscored the need for action.
“The question that we have to ask ourselves is: How could FTX have been allowed to operate with billions of dollars in customer deposits and investments without anyone independently knowing anything about the company’s dubious financials?” Torres said.
