FTX Debacle Could Lead to Crypto Legislation ‘Momentum’: Blockchain Association’s Kristin Smith

Mending crypto’s reputation on Capitol Hill, tarnished in the wake of crypto exchange FTX’s collapse, will require continuing to engage with U.S. policymakers, according to Kristin Smith, executive director of the Blockchain Association.

Former FTX CEO Sam Bankman-Fried was arrested in the Bahamas Monday, just hours before he was scheduled to testify virtually before the U.S. House Financial Services Committee in Washington, D.C.

Smith said on CoinDesk TV’s “All About Bitcoin” program on Monday that the industry can “get beyond this current crisis.” What is needed is to work with a “bipartisan set of policymakers who are interested in finding the right regulatory framework” for crypto, not only to protect consumers but to drive innovation.

Read more: FTX Founder Sam Bankman-Fried Arrested in the Bahamas

“We're going to see a number of bipartisan legislative proposals that are put forth that are going to be very much vetted and debated by multiple committees in Congress, and that we really could see some momentum around getting some legislation done,” Smith said.

“What we don’t want them doing is rushing through legislation that hasn’t been vetted or that nobody understands,” Smith said. She said now is the time for lawmakers to ask questions to get to the bottom of what happened at FTX, especially what happened to the customer funds that were lost in the shuffle.

Politicians could also think twice about taking donations from primarily crypto-based platforms, according to Smith.

Read more: FTX US 'Was Not Independent' of Parent Company, New FTX CEO Will Say in House Testimony

Whether former FTX CEO Sam Bankman-Fried’s political donations, which amounted to upwards of $73 million, can be clawed back to repay FTX creditors, is unlikely, according to Smith.

“Once that money is donated, it’s usually fairly quickly spent,” Smith said, pointing out that in the weeks preceding the election, candidates spend a fairly large quantity of the money they’ve received on sending out mailers and buying airtime.

“If it turns out the source of these funds were indeed customer deposits, that’s obviously a massive misuse,” said Smith. “It could be that the genie's out of the bottle and they won’t be able to get it back in.”