Investors might have avoided FTX if the SEC had addressed Bitcoin ETFs, says BitGo CEO
According to Mike Belshe, the United States Securities and Exchange Commissionâs reluctance to address a âbasicâ regulatory issue like the issuance of a BTC ETF could have paved the way for FTXâs alleged illicit activities.
The collapse of crypto exchange FTX and other bearish events in the space were at the center of discussions among lawmakers and witnesses at the inaugural hearing of the United States House Committee on Financial Servicesâ Subcommittee on Digital Assets, Financial Technology and Inclusion.
Addressing lawmakers at the March 9 hearing, BitGo co-founder and CEO Mike Belshe criticized the U.S. Securities and Exchange Commission for enforcement actions against crypto firms âtrying to do it rightâ â i.e. communicating with regulators and pursuing a path to operate in the country. He cited BitGoâs experience going through the process of approaching the SEC in 2018, seeking a regulatory path forward on the question of how the firm should custody assets, only to wait more than four years for a definitive answer.
According to Belshe, the SECâs reluctance to address a âbasicâ regulatory issue like the issuance of a Bitcoin (BTC) exchange-traded fund could have seemingly opened the door for bad actors like Sam Bankman-Fried to operate FTX as he did. The former CEO faces charges from the SEC, the Commodity Futures Trading Commission and federal prosecutors related to transferring user funds between the exchange and Alameda Research.
âYou do have to wonder if we couldnât have avoided the massive amounts of money that flowed to FTX if the basic principle of a Bitcoin ETF had been provided and approved by the SEC,â said Belshe. âThere had been 25-plus valid applications â some from Invesco and other reputable firms that have done ETFs for many years in the past.â
Much of the discussion among lawmakers and industry experts at the hearing centered around which federal agencies could regulate certain crypto assets should Congress pass related legislation. Some Republican representatives seemed to be particularly critical of the Biden administrationâs approach to crypto, as evidenced in the hearingâs title calling its actions an âattack on the digital asset ecosystem.â
âThis report summarizes President Bidenâs political plan to lawlessly abuse the administrative state to push American crypto firms and their United States customers into offshore, unregulated, opaque and unsafe markets,â said Representative Tom Emmer, citing a Jan. 27 report from the White House on mitigating the risks associated with crypto. âThis administration is weaponizing the banking sector to debank legal crypto activity here in the U.S., using scare tactics to run an entire industry out of the country.â
#HappeningNow: Chairman @RepFrenchHill convenes the Subcommittee on Digital Assets, Financial Technology & Inclusion for a hearing on the Biden Administrationâs attack on the digital asset ecosystem.Â
 Tune In https://t.co/FGQaA37IYN pic.twitter.com/DqBA6O5rcc
â Financial Services GOP (@FinancialCmte) March 9, 2023
Other witnesses at the hearing were more critical of crypto as a whole rather than focusing on blaming any single agency, political party or presidential administration. Representative Brad Sherman, a well-known critic of the space, referred to crypto as a âscourgeâ in the economic system. Lee Reiners, the policy director of the Duke Financial Economics Center, claimed thatthough FTX was one âbad apple,â the entire crypto industry was ârotten.â
âCrypto and the unique nature of crypto was what fueled FTXâs rise, and itâs what made FTX collapse in the blink of an eye,â said Reiners.
Related: Samsung investment arm to launch Bitcoin Futures ETF amid rising crypto interest
The House subcommittee hearing was the first in the new session of Congress to address issues related to the crypto market and the collapse of FTX since December 2022. Lawmakers with the Senate Banking Committee held their own hearing exploring the impact of the âcrypto crashâ in February.