FTX, Binance And Coinbase In The Sights Of Congress

FTX, Binance, and Coinbase are in the sights of Congress. The US Congress, via a committee of the House of Representatives, is investigating the prevention of fraud at several global exchange giants. In particular, the legislator wants to push the exchanges to do more to protect the consumer.

Exchanges must be accountable

The US Congress wants to deal with fraud in the crypto industry. This fight he decided to lead resulted in the sending of a letter, dated yesterday, to the largest crypto-currency exchanges on the planet.

It was Raja Krishnamoorthi, the chairman of the subcommittee on economic policy and in charge of consumers, who asked these companies to retrieve various information and documents concerning the fight against fraud. Exchanges must provide all documents related to cryptocurrency fraud since 2009.

The letter highlights the fact that crypto-currencies have established themselves as a preferred means of payment for scammers and crooks of all kinds, but also a means of easily defrauding consumers. Raja Krishnamoorthi writes in this sense:

"Given the growing popularity of cryptocurrencies both as a means of payment and as an investment, I am concerned by the rapid growth of fraud and the various types of abuse that consumers are experiencing. According to a figure from the Federal Trade Commission, there will be over a billion frauds in the crypto ecosystem in 2022."

Companies that do too little

Among the companies concerned, we, therefore, find Coinbase, FTX, and Binance but also the pioneer Kraken or Kucoin. Only behemoths of the crypto industry who must therefore justify their various actions

concerning fraud.

For the US representative, the action of the exchanges is far from sufficient. He declares against them

"I am also concerned about the apparent lack of action by exchanges to protect consumers transacting on their platforms."

The legislator wonders in particular what mechanisms such as insurance, Coinbase puts in place in the event of fraud or hacks. He also wonders about the compensation mechanisms provided by the different platforms in case of concern. So many legitimate questions in a universe that is still young and subject to recurring hacks and scams.

To go further, Raja Krishnamoorthi asks the exchanges what the federal government could do to help them in the fight against fraud.

READ MORE: FED Meeting: Cryptos Are Exploding!

What regulation to come?

The Congressman sent a similar letter to federal regulators. Thus, the US Department of the Treasury, the Commodity Futures Trading Commission, the FTC, or even the SEC received a letter. The political power wants to know what these different regulators want in terms of regulation.

This letter is also an opportunity to relaunch one of the oldest debates in the industry, that of the legal qualification of crypto-assets. Indeed, the mail asks whether cryptocurrencies should be defined as commodities, financial securities, or both. 

This qualification of cryptocurrencies is notably at the heart of the lawsuit between Ripple and the SEC regarding XRP. Indeed, this debate is one of the most scrutinized by market observers because it has important consequences for the development of the crypto market.

These actions on the part of the House of Representatives testify to a political will to regulate crypto. While for the time being, we are seeing mostly activity from regulators like the SEC, Congress wants to have a say. Thus, it seizes on this subject and seems to begin its reflection with the aim of proposing an appropriate legislative framework.

If the extent of fraud in the crypto industry remains measured, compared to global fraud, action is likely to be taken. The various players in the industry and in the first place the exchanges, therefore, have every interest in showing their credentials and undertaking a real policy to fight against fraud.

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