The downfall of former crypto exchange FTX has had the entire industry in disarray since the situation began to unravel days before it declared bankruptcy on Nov. 11. A new op-ed from United States Senator Elizabeth Warren revealed a negative stance towards the industry with regard to the fallout.
Warren wrote that the crypto industry is on a “well-worn path of financial innovation,” which starts with exciting rewards but ends in “crippling losses.” She compared it to subprime mortgages of 2008, penny stocks and credit-default swaps.
The Senator said what happened with FTX should be a “wake-up call” to regulators to enforce laws on the industry.
On Twitter, some agreed with the Senator, tweeting that the crypto industry is just “smoke and mirrors” and that Warren has been trying to warn the public all along. Though many have pointed the finger back at her, saying regulators don’t understand the industry and incite fear with such comments.
One user pointed out a middle ground saying there is room for regulation when it comes to centralized exchanges, which are much different than the technology of crypto and decentralized exchanges.
Centralized exchanges for crypto are a far cry from crypto the technology. Know the difference and only regulate the centralized exchanges. The risk is the centralized exchanges, not the crypto and not decentralized exchanges/finance. Crypto did not fail. SBF failed. SEC failed.
— Steve Westhoff (@SteveWesthoff) November 22, 2022
The following day, not referencing the op-ed specifically, the co-founder and CEO of Binance Changpeng “CZ” Zhao also tweeted on the topic saying where there is progress there is always failure.
Some (including me) say this will “set the industry back a few years.” But thinking about it, this is natural. There will be failures with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will recover quickly, and become stronger.
In response to CZ’s tweet, many in the community said that this is the reset crypto needed.
Regulators in the U.S. have been actively voicing concerns following the FTX scandal. On Nov. 21, U.S. senators released a letter to Fidelity urging it to reconsider its Bitcoin offerings in light of FTX.
On Nov. 16 Warren, along with Senator Richard Durbin, publicized a letter they sent to the former and current CEOs of FTX — Sam Bankman-Fried and John Jay Ray III. The letter had 13 requests for documents, lists and answers regarding the situation.
Warren has been a major critic of the crypto industry over the last year. Previously she has called DeFi “dangerous” and has been active to expose unsustainable practices in the crypto mining scene in the U.S.
Her latest op-ed also addresses those topics, along with crypto’s role in money laundering and ransomware attacks.