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Congressman flags rising crypto fraud, demands answers from regulators

Rep. Krishnamoorthi, chair of a key House oversight panel, wants to know what federal watchdogs and top crypto leaders are doing to protect consumers

Rep. Raja Krishnamoorthi (D-Ill.) heads the House Oversight Committee’s subcommittee on economic and consumer policy. (Evelyn Hockstein/Reuters)

The cryptocurrency industry, which has enjoyed deferential treatment on Capitol Hill even as a crypto market meltdown has devastated Main Street investors this summer, is coming in for some tougher congressional scrutiny.

A key House oversight panel is asking financial regulators and top crypto platforms what they are doing to combat fraud and sort out competing claims of jurisdiction that have so far stymied clearer federal rules for the industry.

Rep. Raja Krishnamoorthi (D-Ill.), who heads the House Committee on Oversight and Reform’s subcommittee on economic and consumer policy, said the federal government “has been slow to curb cryptocurrency scams and fraud” as losses to consumers remain on track to top $1 billion this year.

“Without clear definitions and guidance, agencies will continue their infighting and will be unable effectively to implement consumer and investor protections related to cryptocurrencies and the exchanges on which they are traded,” Krishnamoorthi wrote in letters sent Tuesday to Treasury Secretary Janet L. Yellen, Securities and Exchange Commission Chair Gary Gensler, Federal Trade Commission Chair Lina Khan, and Commodity Futures Trading Commission Chair Rostin Behnam. Spokespeople for all four declined to comment.

Top crypto trading exchanges, meanwhile, have demonstrated an “apparent lack of action” to protect their customers, he wrote in another missive to the chief executives of Binance.US, Coinbase, FTX, Kraken and KuCoin. He pointed to platforms listing digital tokens with “little or no vetting,” inadequate security measures to guard deposits, and insufficient monitoring to prevent illicit activity.

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“Consumers are often unaware of the current patchwork of resources available to inform their investing decisions, and insurance companies are wary to provide insurance to individual consumers given the lack of regulation of digital assets,” Krishnamoorthi wrote.

He is asking for detailed information from both the regulators and the industry leaders by Sept. 12 on what they are doing to prevent abuse.

It is unclear whether Krishnamoorthi’s push will lead to hearings or an effort to develop a bill, though he said in his letter to regulators that Congress “may need to pass legislation” to bring stability to the crypto market.

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