The collapse of former crypto exchange FTX threw the entire industry into disarray as things began to deteriorate in the days before it filed for bankruptcy on November 11. A new op-ed by US Senator Elizabeth Warren revealed a negative industry stance on fallout.
Warren wrote that the crypto industry is on a “beaten path of financial innovation” that starts with exciting rewards but ends with “major losses.” She compared it to 2008 subprime mortgages, penny stocks and credit default swaps.
The senator said what happened to FTX should be a “wake-up call” for regulators to enforce laws in the industry.
On Twitter, some agreed with the senator, tweeting that the crypto industry is just “smoke and mirrors” and that Warren has been trying to warn the public all along. Although many have pointed fingers at her, saying that regulators do not understand the industry and sow fear with such comments.
One user pointed to the middle ground, stating that there is room for regulation when it comes to centralized exchanges, which are very different from the technologies of cryptocurrencies and decentralized exchanges.
Centralized cryptocurrency exchanges are far from crypto technology. Know the difference and regulate only centralized exchanges. Risk is centralized exchanges, not crypto or decentralized exchanges/finance. Crypto did not disappoint. SBF failed. SEC failed.
— Steve Westhoff (@SteveWesthoff) November 22, 2022
The next day, without specifically referring to the article, Binance co-founder and CEO Changpeng “CZ” Zhao also tweeted that where there is progress, there is always failure.
Some (myself included) say it will “set the industry back a few years”. But if you think about it, it’s natural. There will be setbacks with progress. Happened in regulated TradFi in 2008, after 70+ years of development. The industry will quickly recover and become stronger.
— CZ Binance (@cz_binance) November 23, 2022
In response to CZ’s tweet, many in the community said it was a necessary crypto reset.
Related: Will SBF be penalized for mismanaging FTX? Do not count on it
Regulators in the US have been actively voicing concern since the FTX scandal. On Nov. 21, US Senators sent a letter to Fidelity urging them to reconsider their bitcoin proposals in light of FTX.
On November 16, Warren, along with Senator Richard Durbin, released a letter they sent to former and current FTX CEOs Sam Bankman-Fried and John Jay Ray III. The letter contained 13 requests for documents, lists and responses on the situation.
Last year, Warren was the top critic of the crypto industry. She has previously called DeFi “dangerous” and has been active in exposing unsustainable cryptocurrency mining practices in the US.
Her latest article also touches on these topics, as well as the role of cryptocurrencies in money laundering and ransomware attacks.