Washington Watchdogs Outgunned in Crypto's Wild West

A recent post on the Politico webpage notes that the oversight gaps that allowed for the disastrous failure of FTX underscore the deep risks of trading on unregulated digital currency exchanges.

According to the article, “the oversight gaps that allowed for the disastrous failure of FTX — which until just weeks ago was one of the world’s most respected crypto businesses before it was exposed as a house of cards — underscore the deep risks of trading on unregulated digital currency exchanges. It has prompted policymakers in Congress and at federal agencies to consider new laws and more aggressive penalties to head off a future meltdown. Crypto has flourished in a regulatory gray area, where even activities that resemble traditional financial products have escaped oversight.”

FTX’s bankruptcy filings include hair-raising allegations of top executives — including Bankman-Fried, a former political mega-donor — treating FTX and its 130 affiliates like a slush fund. Behind its sleek veneer, FTX was actually a loosely organized network of investment firms, crypto businesses and holding companies with no centralized accounting system, little oversight of personnel and few internal controls to prevent Bankman-Fried and other employees from dipping into the company till.

The post says that the big question is whether regulators have sufficient authority or need more power. Two key financial market agencies — the SEC and the Commodity Futures Trading Commission — are facing scrutiny about why they didn’t do more to shield consumers.

“Part of what we’re seeing is a sign that the financial regulatory system is not able to evolve as quickly as it needs to, to address emerging threats,” the article says.

Read it at Washington watchdogs outgunned in crypto's Wild West (politico.com).