U.S. Senate Sends Letter to Binance, Coinbase and Other for Financial Data Reports

Centralized crypto exchanges (CEXs) in the industry are headed for a round of tough questions from the United States Senate Democrats to explain their various protective measures in the event of financial emergencies following the collapse of FTX. 

According to a Tuesday report from The Washington Post, Senator Ron Wyden (D-Ore.), the head of the tax-focused Senate Finance Committee, sent letters to the top exchanges in the crypto space, seeking information about their balance sheets. Some of the exchanges include Binance, Coinbase Kraken, KuCoin, Bitfinex and Gemini,

U.S. Senator Laments on Crypto Regulation

Senator Wyden also requested that the companies provide separate information regarding how they manage customers’ funds and their policies in the face of a financial crisis, especially bankruptcy. 

While addressing the letter to the exchanges, the U.S. Senator referred to a series of federal laws enacted to protect investors in regulated banks or registered securities in the event of bad times, like the failure of the two major companies FTX and the Do Kwon-led project, Terra (LUNA) blockchain. 

The Senator lamented that if such laws were imposed on cryptocurrencies before the catastrophic collapse of these firms, very few investors would be impacted. 

“If these protections had been in place before the failure of FTX. Far fewer retail investors would be facing precipitous financial harm today,” said Senator Wyden. 

Crypto Exchanges to Show Proof of Reserves 

Following the collapse of FTX, Binance CEO Changpeng Zhao (CZ) proposed for all exchanges to do Merkle-tree proof-of-reserves to ensure investors that their assets are safe. 

The exchange recently released proof of its reserve showing its Bitcoin (BTC) position. Other exchanges such as KuCoin, Gate.io, Poloniex, and Bitget promised to provide their audits in due time. 

While the exchanges are working to rebuild the industry to regain users’ truth, government authorities worldwide are concerned about the future of the emerging economy.

FTX Collapse Attracts Senate’s Attention 

The FTX saga has attracted the attention of several American authorities seeking to uncover the truths behind the alleged mismanagement of users’ funds that led to the company’s liquidity crunch and, eventually, the bankruptcy on November 11. 

On November 22, the U.S. Senate Committee on Agriculture, Nutrition and Forestry said it plans to hold its first hearing with the fallen exchange on Thursday, December 1, to determine the cause of the crash.

Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), will be a key witness during the hearing. 

Similarly, the U.S. Committee on Financial Services is also preparing a case against the company.