SEC Commissioner Says FTX Collapse Could Be Catalyst For Regulation

November 13, 2022 11:44 am Comments

The sudden collapse of major crypto exchange FTX has caused ripple effects on the rest of the crypto industry and has also affected the current state of the crypto markets.

So far, the event has brought negative attention and may be potentially encouraging lawmakers to create more regulation for crypto firms.

SEC Commissioner Hester Pierce made comments that said that the collapse could be the one major catalyst that was needed.

Of course, over regulation is definitely not something that the crypto industry needs, but the need for clear guidelines and regulations is something that the industry has needed in order to prevent the SEC from creating its own interpretations of the law.

CoinDesk reports:

Peirce, who joined CoinDesk TV “First Mover” just moments before Bahamas-based FTX announced that it had filed for Chapter 11 bankruptcy protection in the U.S., said that despite the dark moment for the industry, FTX’s downfall could be the “catalyst” government agencies needed to “sit down” and create clear regulations.

“That doesn’t mean just bringing enforcement actions,” Peirce said, “but we also need to know, thinking about this as a society, how do we want to regulate this thing.”

Peirce said the difficulties that come with regulating digital assets could be solved in a more productive and efficient manner if the SEC and the Commodities of Futures Trading Commission (CFTC) were to coordinate in some fashion. In the past, former CFTC Chairman Timothy Massad has voiced his support for a self-regulatory organization (SRO) overseen by both the CFTC and the SEC.

“Having the SEC and CFTC work together makes a lot of sense,” Peirce said. “And even before Congress acts, we can do a lot of work jointly and get input from the border public.”

Pierce, however, did not comment regarding the debate on whether the SEC or the CFCT should be the main regulator for the crypto industry.

Instead, she maintained a neutral position where she mentioned that allowing only one regulator to focus on crypto would be problematic.

It is clear that there were many advantages of blockchain technology and that it being integrated with the back end of the existing financial system would be something that would be very beneficial.

With that being said, she mentioned that it might once again involve the SEC if that ever happened.

CoinDesk concludes:

Friday morning, FTX Group, along with, FTX US, Alameda Research and an estimated “130 affiliated companies,” filed for bankruptcy protection in the U.S. Meanwhile, the company’s CEO, Sam Bankman-Fried, said he would be stepping down.

In the midst of the debacle, Peirce said for crypto it’s a strong “reminder” for people to take into account some of the “basic lessons from traditional finance,” adding that things such as counterparty risks and who is in charge of handling a user’s assets is a “real thing.”

“This is not a great moment and it’s attracting a lot of negative attention,” Peirce said. “But at the same time, it can be a catalyst for us to sit down and do some of the regulatory work.”

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