Florida Banking February 2023

STRAIGHT TALK FROM THE PRESIDENT’S DESK

FTX FIASCO BECOMES CRYPTO CAUTIONARY TALE

BY ALEJANDRO “ALEX” SANCHEZ, FBA PRESIDENT AND CHIEF EXECUTIVE OFFICER

A re you tired of all the crypto talk? Some have bought and sold at the right time to become ultra-rich, while some have lost their shirts and other clothing in this process. Will crypto really ever compete with the good ol’ American dollar? It might, and we have to continue monitoring this industry. But FTX’s death spiral, which was prompted by a run on the exchange, and culminated with the company’s announcement of its chapter 11 bankruptcy filing and resignation of its CEO, has fueled the debate on the need for enhanced oversight. (Even my beloved Miami Heat were impacted by the bankruptcy filing of FTX and are now working on a new arena sponsor.) Crypto Exchange FTX expects more than one million creditors; it will be a mess. Congresswoman Maxine Waters (D-Calif.), the outgoing chair of the House Financial Services Committee, and Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking Committee, joined Rep. Pat McHenry (R-N.C.), ranking member of the House panel and its likely future chair, in calling for more scrutiny on crypto markets. Congress has been slow in enacting the proper oversight for the crypto industry. I am tired of the chatter — enough time has passed (several sessions of Congress, to be exact), with no action. The time has come for Congress to enact the legislation needed to regulate that industry. I have always wondered, would the federal government really allow the transfer of millions of dollars via crypto? Would a wire of millions in crypto be allowed from Tallahassee to London to Islamabad? Would the government know who is receiving it? Yes, I have been told about the blockchain process that helps to identify the parties involved, but would that eliminate all BSA/AML concerns of the federal government? I doubt it. Protecting national security and implementing anti-crime measures should be

primary drivers of cryptocurrency policymaking and regulation. Some of the reasonable and common-sense ideas I have heard to regulate the crypto industry include: • Take a comprehensive and coordinated approach to regulat ion that resolves regulatory and legal debates about digital asset classification. • Ensure the crypto regime is comparable to banking system regulation. • Prevent bad actors from using cryptocurrencies for illicit activities. • Bring stablecoins within the regulatory perimeter. • Congress must act now and do the following: • Prevent the rise of a shadow banking system of unregulated platforms. Prioritize examiner training on digital assets. Reject special-purpose bank charters for crypto companies that do not fully meet the requirements of federally insured and supervised chartered banks. Examine the risks and unintended consequences associated with a proposed U.S. Central Bank Digital Currency (CBDC). We oppose a U.S. CBDC that would divert deposits from banks to the Federal Reserve. Harmonizing digital asset regulations will ensure consistent oversight of cryptocurrency service providers, establish clear guidelines for permissible bank activities, and avoid gaps to minimize the risk of regulatory arbitrage. Unregulated cryptocurrency would disintermediate banks — undermining their ability to support local customers and communities — while threatening consumer privacy and protections as well as financial stability. The FBA looks forward to continuing to work with members of Congress as this important debate continues.

6 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING