Sen. Sherrod Brown calls on Treasury Secretary Janet Yellen to help rein in cryptocurrency firms after FTX collapse

Bahamas-based crypto exchange FTX filed for bankruptcy in the U.S. on Nov. 11, 2022, seeking court protection as it looks for a way to return money to users.

Senate Banking Committee Chairman Sherrod Brown urged Treasury Secretary Janet Yellen on Wednesday to work with lawmakers and financial regulators to help write legislation to rein in the cryptocurrency market in the wake of the collapse of crypto exchange FTX.

In a letter to the Treasury chief, Brown, D-Ohio, told Yellen to incorporate recommendations from the Financial Stability Oversight Committee, including legislation that would “create authorities for regulators to have visibility into, and otherwise supervise, the activities of the affiliates and subsidiaries of crypto asset entities,” with financial regulators, such as the Securities and Exchange Commission and the Federal Reserve Board.

An Oct. 3 FSOC report noted gaps in the regulation of crypto asset activities.

Brown sent the letter the day before Congress holds its first hearing on FTX’s collapse. The Senate Agriculture Committee has called Commodity Futures Trading Commission Chairman Rostin Behnam to testify Thursday on the firm’s dramatic and swift failure. Brown intends to hold his own hearing on FTX and its founder, Sam Bankman-Fried, in December, a spokesperson previously told CNBC.

“As we continue to learn more details, the failure of this crypto exchange brings to mind the litany of financial firm failures due to the combination of reckless risk taking and misconduct,” Brown wrote to Yellen. “It is crucial that risks in this area are contained and do not spillover into traditional financial markets and institutions, and we draw the correct lessons regarding customer and investor protection.”

When asked for comment, the Treasury Department referred CNBC to comments Yellen made at The New York Times’ DealBook Summit on Wednesday.

“To the extent that the crypto world could deliver faster, cheaper, safer transactions, we should be open to financial innovation,” Yellen said. “That said, that’s not what most of it has been about. And I strongly believed and continue to believe and I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation. And it doesn’t.”

FTX filed for bankruptcy and its CEO, Bankman-Fried, stepped down earlier this month. The crypto giant was valued at $32 billion.