FTX declared bankruptcy this month with $900 million in assets against $9 billion in liabilities. Its founder and former CEO, Sam Bankman-Fried, is being questioned by police in the Bahamas, and many customers are unable to withdraw their deposits. Its holdings of Serum’s SRM, a token Bankman-Fried developed, dropped from a value of more than $2 billion to less than $100 million. Things got worse over the weekend after FTX was apparently hacked, leading to the loss of an additional several hundred million. Some commentators are already calling it cryptocurrency’s “Lehman moment,” referring to the 2008 collapse of Lehman Brothers that signaled we were in a financial crisis.
In the wake of this epic collapse, Congress should get its head out of the sand and pass the Digital Commodities Consumer Protection Act designating the Commodity Futures Trading Commission, or CFTC, to regulate the crypto industry. The agency, which regulates commodities and derivatives trading, has already taken on a role in regulating crypto, sharing duties with the Securities and Exchange Commission, or SEC. Both agencies are on shaky ground, as no legislation designates either as an enforcement agency or defines whether crypto is a security or a derivative. Both have launched probes into FTX’s handling of customer accounts.