The collapse of cryptocurrency exchange FTX has pulled a number of other corporations down with it and threatens the steadiness of the digital coin marketplace, but some lawmakers on Capitol Hill are holding on to their crypto investments — at the same time as they call for tighter regulations.
No less than nine lawmakers in Washington across each the House and Senate have traded over a dozen different crypto stocks and assets since last yr, based on Capitol Trades, a web site that tracks stock trades by lawmakers on Capitol Hill.
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One other lawmaker, Republican Sen. Tommy Tuberville of Alabama, disclosed at a Senate Agriculture Committee hearing about FTX on Thursday that he, too, holds some crypto assets. Tuberville’s most up-to-date disclosure reports from this yr reviewed by CNBC don’t show any crypto stock purchases.
Out of all ten offices contacted, just one said they sold their crypto stock holdings after FTX imploded. Rep. Marie Newman, D-Unwell., who lost her bid for reelection owned crypto top off until last week, recently sold her digital token stocks because the industry took a success.
“Congresswoman Newman’s husband sold their coin-based stock last week because of the volatile nature of the sector,” Marcus Garza, a spokesman for Newman, told CNBC in an email.
Congressional records show Garza and her husband previously held positions in multiple crypto related stocks and assets, including in Coinbase Global, a cryptocurrency trading platform. Newman and her husband recently disclosed a January joint purchase of Coinbase stock value between $1,001 and $15,000. The disclosure reports for all lawmakers only show a spread of how much their stock purchases are value.
Coinbase’s stock price, as of Thursday morning, is down by over half a percentage point.
Kedric Payne, an ethics attorney on the Campaign Legal Center, said lawmakers who own crypto assets have a conflict of interest in trying to jot down laws to rein within the industry following the collapse of FTX.
“That is one other example of how even well-intentioned lawmakers cannot escape the perception of corruption after they own individual stocks or crypto,” Payne said in an email. “Voters won’t likely trust that lawmakers who own crypto will regulate it to their detriment. Reform is inevitable because these conflicts of interests aren’t going away.”
He noted that these conflicts could be avoided if Congress passed laws that put “a ban on members and spouses trading individual stocks unless there in a blind trust.”
Walter Shaub, who was the director of the USA Office of Government Ethics under former Presidents Barack Obama and, for a brief stint, Donald Trump, said lawmakers shouldn’t hold crypto assets after they are writing recent laws to tighten oversight of the industry within the wake of the FTX scandal.
“It’s outrageous that members of Congress could be invested in cryptocurrency and related corporations at a time when the FTX scandal has necessitated congressional oversight and possible reform,” Shaub said. “That is precisely why Congress must ban its members from trading or owning conflicting investments.”
The shortage of internal controls and various questionable decisions by former CEO Sam Bankman-Fried are shining a brilliant light on the scant oversight of the industry. A number of the lawmakers who hold crypto investments have criticized the failure of Congress to pass laws that will give financial regulators just like the Securities and Exchange Commission more authority to police the industry.
Sen. Pat Toomey, R-Pa., who can be the rating member of the Senate Banking Committee, tweeted last month after the FTX collapse that “The impact to Americans from today’s bankruptcy filing by @FTX_Official may need been mitigated if there have been a smart, legislatively authorized, American regulatory framework for digital assets.” Toomey is retiring from Congress and is being replaced by Democrat John Fetterman.
Despite the calls for clearer regulations, Toomey signaled to CNBC he has no plans to sell his cryptocurrency investments. He and his wife owned between $2,000 and $30,000, combined, between Grayscale Ethereum Trust and Grayscale Bitcoin Trust as of the tip of last yr, based on Toomey’s latest annual financial disclosure reviewed by CNBC.
Grayscale Ethereum Trust represents an investment vehicle that is meant to carry Ethereum assets, a cryptocurrency. Grayscale Bitcoin Trust is an investment vehicle, with the aim of holding Bitcoins.
Toomey told CNBC “HODL” when asked about whether he plans to sell his crypto stock following FTX’s collapse. HODL is an abbreviation for “hold on for dear life,” a standard phrase utilized by crypto investors after they don’t have any plans to sell their industry assets, even when prices are falling. The value of Grayscale Ethereum Trust is down almost five percent. The value of Grayscale Bitcoin Trust is down almost two percent.
Representatives for just about all the opposite lawmakers who’ve purchased stock in cryptocurrency didn’t respond when asked whether their bosses plan to unload their digital token assets following the FTX collapse.
Ryann DuRant, a spokeswoman for Tuberville, told CNBC in an email that the Alabama lawmaker will proceed to reveal “all qualifying transactions” but didn’t answer specific questions on his crypto stock holdings. “Senators are required to file periodic reports for certain financial securities transactions of $1,000 or more. The Senator has, and continues to, report on all qualifying transactions,” DuRant said in response to an inventory of questions.
Sen. Cynthia Lummis, R-Wyo., owns between $100,001 and $250,000 in Bitcoin, based on her latest financial disclosure report. The report, which shows Lummis’ assets through last yr, says a “Qualified Blind Trust (QBT) is currently pending approval from the U.S. Senate Ethics Committee.”
Lummis is a member of the Senate Banking Committee and has cosponsored laws with Sen. Kirsten Gillibrand, D-N.Y., that  would classify digital assets as commodities like wheat or oil and empower the Commodity Futures Trading Commission to rein within the nascent industry. Because the collapse of FTX, Lummis has said “it’s just time to manage this space.”
Abegail Cave, a spokeswoman for Lummis, told CNBC after publication of this story that the Wyoming lawmaker “is a self-proclaimed HODLR and nothing has modified that view.” She also noted Lummis has “been working with the Senate Ethics Committee to place her assets, including her bitcoin holdings, in a blind trust.”
After pushing to permit cryptocurrencies into retirement plans, Tuberville, who was a school football coach before heading to Washington, compared the autumn of FTX to losing a football game on the Thursday hearing featuring Rostin Behnam, chair of the Commodity Futures Trading Commission. He also said there must be more rules surrounding crypto.
“Type of remind me of sitting in a chair after I got the heck beat out of me within the football game and knowing the opposite team didn’t go by the foundations,” Tuberville said. “We have screwed this up. You bought to have rules.”
