US lawmakers question federal regulators on banks' ties to crypto firms

Two members of the United States Senate person called connected the heads of national fiscal regulators to code “ties betwixt the banking manufacture and cryptocurrency firms” successful the aftermath of FTX’s collapse.

In letters dated Dec. 7 to Federal Reserve seat Jerome Powell, acting Comptroller of the Currency Michael Hsu, and Federal Deposit Insurance Corporation acting seat Martin Gruenberg, Senators Elizabeth Warren and Tina Smith — some connected the Senate Banking Committee — acknowledged that the crypto manufacture was not truthful “deeply integrated” with accepted fiscal institutions to severely interaction markets aft FTX’s bankruptcy filing. However, the 2 lawmakers pointed to reports suggesting ties betwixt FTX and the Washington-based Moonstone Bank arsenic good arsenic stablecoin issuer Tether and the Bahamas-based Deltec Bank with seemingly nary oversight from national regulators.

“While the banking strategy has truthful acold been comparatively unscathed by the latest crypto crash, FTX’s illness shows that crypto whitethorn beryllium much integrated into the banking strategy than regulators are aware,” said Warren and Smith.

The senators called connected Powell, Hsu, and Gruenberg to supply accusation connected whether the regulators planned to reappraisal crypto firms’ connections to banks, arsenic good arsenic a database of banks regulated by the agencies presently engaged successful crypto-related activities. In addition, Warren and Smith questioned the heads arsenic to whether FTX whitethorn person utilized lawsuit funds to put much than $11 cardinal successful Moonstone, mounting a Dec. 21 deadline for answers.

Warren has sent respective letters related to investigations pursuing FTX’s bankruptcy filing connected Nov. 11. The Massachusetts legislator has joined with different members of Congress to demand answers from erstwhile FTX CEO Sam Bankman-Fried, inquire Silvergate Bank to provide details connected its relationship with FTX entities pursuing allegations astir its concern practices, and petition the Department of Justice hold executives astatine the firm accountable “to the fullest grade of the law.”

Related: FTX involvement successful US slope raises concerns astir banking loopholes

The Senate Banking Committee has scheduled a Dec. 14 proceeding connected “why the FTX bubble burst” with seat Sherrod Brown threatening to contented a subpoena for Bankman-Fried should helium not attest voluntarily. The proceeding was the 3rd announced by assorted committees with the House of Representatives and Senate, with the House Financial Services Committee setting a Dec. 13 date for a akin investigative proceeding connected FTX.