Crypto Industry Leaders Must Step Up, DOJ Says

In the wake of what some say is the crypto industry’s biggest setback ever, US officials this week said there’s now a heightened diligence and risk burden on crypto companies still standing. 

Regulators need the industry’s expertise when it comes to ensuring companies are acting within existing crypto guidelines, according Sanjeev Bhasker, digital currency counsel of the Digital Currency Initiative at the Department of Justice. 

“You are the first line of defense…when it comes to pride and protecting the community,” Bhasker told members of the Blockchain Association, a digital assets lobbyist, at the Policy Summit in Washington. 

Lawmakers can only do so much when it comes to protecting consumers, Rep. Jake Auchincloss, D. Mass., agreed. 

“Investors need to be doing much more due diligence,” Auchincloss said at the event, referring to venture firms and additional equity holders who backed the now-defunct exchange FTX. 

It falls on good actors to represent the industry well, Bhasker added — and, especially, the need for industry participants to remain vigilant.

“We encourage the private sector industry to self-regulate,” Bhasker said. “When you see issues of fraud and suspicious activities, report it.” 

In terms of what to expect from the Hill in the coming months, Auchincloss is hopeful several of the current proposals can make it through one way or another. But, Auchincloss added, it is important to note that FTX’s fraud was never permissible, even under current regulations. 

“The crimes FTX was committing…were illegal 100 years ago,” Auchincloss said. 

Regulatory guidelines have already proven to work as consumer protection measures, CFTC Commissioner Kristin Johnson said at the conference, pointing to FTX subsidiary, LedgerX, FTX US Derivatives. 

The firm is notably absent from the bankruptcy filing, Johnson said, in part thanks to their due diligence in complying with the futures watchdog’s regulatory requirements. In 2017, LedgerX applied to register with the CFTC as a derivatives clearing organization (DCO). 

The CFTC has independently confirmed LedgerX does not belong on the list of FTX bankrupt subsidiaries, Johnson said. 

“Not $1 of customer assets have been compromised, to the best of our knowledge,” Johnson said of LedgerX.

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