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Binance-FTX deal will bring regulatory ‘control’ over crypto exchanges: Blockchain Association’s Kristin Smith

Crypto exchange FTX’s fall from grace could be the catalyst for the US Congress to pass tougher regulations, said Kristin Smith, executive director of the Blockchain Association.

Smith told CoinDesk TV on Wednesday that “lawmakers are very attentive” to what happens next with the FTX exchange founded by Sam Bankman-Fried. A CoinDesk scoop has revealed that the exchange’s sister company, Alameda Research, has substantial amounts of FTT tokens (the native token of FTX) on its balance sheet. Rival exchange Binance has started selling off its holdings of FTX tokens. This sparked a panic that led to Binance’s proposal to take over most of FTX’s operations.

“This is going to invite a thorough examination of how centralized exchanges should be regulated,” Smith said during an appearance on CoinDesk TV’s “First Mover.” However, she added, “what happened with FTX may not be able to be dealt with by US regulations” because Binance.US and FTX.US units “are not part of this agreement” .

Read more: The divisions of Sam Bankman-Fried’s crypto empire fade on the balance sheet of his business titan Alameda

The survival of Bahamas-based FTX will likely depend on Binance, the world’s largest exchange by volume, following through on its letter of intent to buy it. FTX was once the fourth-largest exchange by volume, according to data from CoinMarketCap.

Still, if the deal were to happen (although it now seems unlikely), it would mean Binance would dominate over 80% of the global crypto market, raising anti-trust concerns from a foreign company owning an exchange with a substantial amount. US retail users.

Smith said FTX’s unstable future only underscores what has been seen in the past. “Congress is very interested” in finding a way to “regulate spot markets” by having exchanges register with the Commodities Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC), she said. declared.

“As part of that, you might have some kind of proof of reserves and guidelines on what you’re supposed to do with customer deposits,” Smith said, referring to the idea that when users place their crypto on an exchange “there is an expectation…that it is not taken and loaned.

Read more: Binance leans heavily on dropping FTX Rescue Takeover after first look at the books: source

“It’s going to open up a more robust discussion about foreign exchange regulation,” Smith said.

Smith’s views on regulation were echoed by Rep. Jim Himes (D-Conn.), who won re-election to Congress in Tuesday’s election. Himes told CoinDesk TV that one thing is clear: the government must accelerate its work to establish a clear regulatory playing field.

Himes noted, as did Smith, that the acquisition of an exchange with a substantial number of U.S. retailer users by a foreign player raises antitrust concerns.

“Whenever there is talk of Chinese investment in a technologically innovative company, a lot of antennas go up,” said Himes, who was a former banker in the late 1990s. (Changpeng Zhao, CEO of Binance, is Chinese .)

Read more: Sam Bankman-Fried no longer a billionaire after $14.6 billion wipeout: Bloomberg

Although crypto played almost “no role” in how Americans voted, Himes said that “there are a lot of Republicans [and] Democrats who are happy to offer a regulatory framework that will create a lot of certainty. »

He added that as the FTX-Binance debacle unfolds, “investors in this [crypto] need to understand that this is an immature and volatile market and they need to be careful. »