US to begin hearings on collapse of FTX

The US House of Representatives’ Financial Services Committee begins its hearings into the collapse of FTX and broader implications for

FTX collapse hearings

The US House of Representatives’ Financial Services Committee will begin hearings into the collapse of FTX today – Photo: Stefani Reynolds/Agence France-Presse/Getty Images

The US House of Representatives’ Financial Services Committee begins its hearings into the collapse of FTX and broader implications for the deregulated financial industry today.

The hearings are a direct result of FTX’s collapse in November and the loss of billions of dollars, which prompted renewed calls for regulation of cryptocurrency. Beginning in early 2020 at the outset of the COVID-19 pandemic, cryptocurrencies have attracted retail and institutional investor interest as well as persistent regulatory attention. The collapse of FTX and questions surrounding its relationship with sister-firm Alameda Research—as well as the conduct of FTX founder Sam Bankman Fried—will only continue this trend.

The House committee’s hearings are one of many congressional actions in response to the collapse. Attempts to regulate the industry will be accelerated, particularly in the near term. Sam Bankman Fried’s continued public statements and willingness to discuss the collapse of FTX—despite having resigned as CEO—will ensure that the issue remains front of mind. Regulatory action is also likely to reduce volatility and interest in cryptocurrencies, particularly among retail investors. Regulation will likely focus on enhanced reporting requirements as well as protections for individual investors. Legal investigations are likely underway and will also continue the long-running crypto-winter.