For years now, leaders on Wall Street and Washington looked the other way as the crypto industry worked to infiltrate our financial system and rewrite the rules to their benefit. Leaders that should have known better simply accepted the fairytale of crypto, and FTX founder Sam Bankman-Fried’s “vision.” They did so without doing the most basic due diligence or asking the most obvious questions if they thought it would make them rich.
The crypto industry followed the financial industry’s standard playbook of using all the levers of the influence industry to buy special treatment for its special interests at the expense of the public interest. Meanwhile, firms like FTX used a revolving door strategy of hires from the CFTC and elsewhere to use their knowledge, influence, and access at the agency and in Washington to move FTX’s agenda.
Better Markets has stood against the crypto wave and asked the tough questions. This includes voicing our opposition to FTX’s proposal to offer non-intermediated, margined clearing of Bitcoin futures products.
In the wake of FTX’s demise, the crypto industry argued FTX’s collapse showed new legislation and regulation was needed. This is not true. The current laws and rules are fully adequate to address the lawlessness going on in crypto. In fact, regulators at the banking agencies and the SEC withstood enormous political and industry pressure to allow crypto access into the core of the financial and banking system, which has helped prevent additional damage to the financial system.
It is true that FTX was registered and licensed by the CFTC, which failed to properly regulate the company. The CFTC has too often been a cheerleader for the crypto industry instead of using the regulatory powers they already have to enforce the existing laws. That must change.
Below are resources on the FTX collapse, crypto, Washington’s revolving door and the role of regulators.
Selected Additional Crypto Work
Dennis Kelleher Discusses FTX and the Future of Crypto on CNN (11/16/22)
“Critics are now calling for a pause in Washington in the wake of FTX’s collapse. ‘We don’t need more legislation. We need more money and support for regulators to go after what is fundamentally a lawless industry,’ said Dennis Kelleher, the president of Better Markets, which advocates for tougher financial regulation. ‘We need elected officials to prioritize the public interest rather than campaign contributors and lobbyists.”
“No one should be shocked by FTX’s demise,” Kelleher wrote in a scathing statement released on Sunday. “The fiction of crypto was visible to all who wanted to see.”
The Financial Times Tech Tonic podcast covers the crypto lobby’s enormous influence in its series “A sceptic’s guide to crypto.” They spoke with our Dennis Kelleher about the stunning amount of money being spent and how it could impact our entire financial system.
“Why is the contagion so limited? I asked that question of Dennis Kelleher, a co-founder of Better Markets, a nonprofit that advocates for financial regulation in the public interest. “The only reason we do not currently have a financial crisis, with a crash and with bailouts, is because regulators have withstood enormous pressure to allow interconnection and linkages between the crypto activities and the core of the financial and banking system.”
The FTX proposal would encourage speculation, rather than finding stable prices, said Dennis Kelleher, president of Better Markets, a D.C.-based think tank that focuses on accountability, transparency and fairness in financial markets. The proposal “removes a historic layer of protection that has worked extremely well,” Kelleher said. “The markets are going to be transformed in a way that the interests of actual producers and purchasers are going to end up subordinated to speculators and financial products.”