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Crypto Price Check: Lawmakers Want Answers in Light of FTX Collapse

Lawmakers worldwide are looking to increase regulatory oversight of the crypto sector in light of FTX's collapse.

Cryptocurrency prices have been struggling as investors retreated following the stunning collapse of the cryptocurrency exchange FTX.

Bitcoin was up slightly to $16,857.60 on Dec. 8, according to data firm CoinGecko. Ether, the native currency of the ethereum blockchain, was up modestly to $1,244.54, while dogecoin gained 0.6% to $0.096785. 

FTX filed for bankruptcy on Nov. 11 in the face of a cash crunch caused by a withdrawal run by FTX clients. The firm's founder and former CEO, Sam Bankman-Fried, 30, has denied wrongdoing.

According to credit-rating provider Moody's, the overnight implosion of FTX and its sister company, Alameda Research, will have "long-lasting effects on the crypto industry."

"The majority of the crypto market has seen low trading volume over the past week and, as a result, remained relatively flat," said Billy Endres, a cryptocurrency expert with Finder. "Ethereum is down about 4% on the week, while bitcoin has moved slightly over 1% and is trading just under US$17,000."

Endres said most traders seem to be playing a waiting game following the FTX and Alameda Research saga. 

'Patience May Pay Off'

"Uncertainty and speculation surrounding exchange regulations continue, and FTX customers are likely losing hope that their stolen assets will be returned," he added.

"That said, patience can pay off. Most high-volatility breakouts come after drawn-out trading ranges. A range break and confirmation of a new trend will likely be met with high volume."

Whether that comes in the form of buying or selling, Endres said, "is yet to be established." 

Lawmakers are stepping up in light of the FTX crash to call for tighter regulation of the crypto industry.

U.S. Rep. Ritchie Torres (D-New York) recently introduced two pieces of crypto legislation -- the Crypto Consumer Investor Protection Act and the Crypto Exchange Disclosure Act -- aimed to provide the sector with some transparency. 

Torres also asked the General Accounting Office to investigate the Securities and Exchange Commission's handling of the FTX debacle.

"Chair Gary Gensler, by the logic of his own public pronouncements, is singularly responsible for the regulatory failures surrounding the collapse of FTX and its affiliate FTX US," Torres said in a letter to the agency.

In addition, Sen. Elizabeth Warren (D-Massachusetts) is working on a sweeping cryptocurrency bill that would hand the SEC most regulatory authority over the market, according to the news outlet Semafor.

Reconsider Regulatory Framework

"The FTX bankruptcy already has shown a domino effect on crypto liquidity," said Winston Ma, managing partner of CloudTree Ventures, noting the collapse of BlockFi. "Maybe from the crypto regulation aspect, we may also see a domino effect of rapid crypto lawmaking across the globe."

Ma said that lawmakers in Kazakhstan passed stringent bills related to cryptocurrencies and mining, requiring miners to purchase electricity from the public grid only if there is a surplus. 

They also added a number of new tax rules relating to crypto mining and crypto transactions and plan to ban the advertising of crypto transactions.

And in Singapore, Ma said, Temasek, the sovereign wealth fund that has written off its $275 million investment in FTX to zero, had to answer questions, together with related Singapore government agencies and regulators, from the Singapore parliament. 

"It’s likely that Singapore may reconsider its crypto regulatory framework," said Ma, author of "Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse." "It’s interesting to keep an eye on the development of Hong Kong crypto regulation."

Days before the FTX debacle, Ma said, the Hong Kong government announced a plan to be a crypto hub in Asia and to generally enable retail investors to participate in crypto trading.

"It remains to be seen whether the final crypto rule of HK will include some adjustment to its recently announced blueprint, considering that FTX had its origin from Hong Kong," Ma said.