US senators are increasingly pressuring financial regulators to clear up the FTX affair. They want clear answers to the many concerns that the collapse of the crypto exchange has raised. On December 7, senators Elizabeth Warren and Tina Smith were in this direction. Indeed, they sent a letter to the financial regulators to submit a special request.
Banks may have backed crypto businesses
Senators Elizabeth Warren and Tina Smith suspect close ties between the banking system and the crypto industry. To this end, they have sent a letter to every major US regulator. This, to ask that investigations be carried out on the subject. The letter was notably sent to Jerome Powell, the chairman of the Federal Reserve (Fed).
” The banking system was spared the FTX-induced turmoil. Despite industry efforts to gain access to the banking system […]cryptocurrencies are not, so far, deeply integrated into the traditional banking system“, could we read in the letter.
Afterwards, the senators said:Nonetheless, it looks like crypto firms may have closer ties to the banking system than previously thought. According to a New York Times report, Alameda […] invested $11.5 million in Washington“.
Several small banks depended on crypto entities
In their letter, the senators quoted a statement from the former president of the Independent Community Bankers of America. It said that state regulators and the Fed should have been alerted by “the fact that an offshore hedge fund, which was essentially a crypto company, bought a stake in a small bank“. The bank in question would be Moonstone Bank.
They highlighted the fact that Moonstone is not the only bank linked to crypto entities. There would also be Deltec Banks, Provident Bancorp Inc, Silvergate Capital Corp, Metropolitan Commercial Bank, etc.
“Many of these smaller banks rely heavily on their crypto customers.They are now experiencing increased volatility“, specified the senators. Next, they listed a series of questions for regulators to answer.no later than December 21, 2022“.
Senators Elizabeth Warren and Tina Smith would like regulators to describe how their agencies “assess banks’ relationships with crypto businesses and engage in crypto-related activities“.
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