The House Committee on Oversight and Reform has decided to shift its attention toward the crypto sector.
In order to protect people from fraudsters, it has turned up the pressure on crypto exchanges and federal agencies.
Agencies and exchanges
The committee sent a bunch of letters on Tuesday morning and the list of recipients included both crypto exchanges and federal agencies.
There were five digital asset exchanges that received letters, which included KuCoin, Kraken, Binance.US, FTX, and Coinbase.
As for the federal agencies that received letters, there were four in number and included the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), and the Department of Treasury.
The committee asked them to provide documents and information regarding their activities in relation to protecting consumers against crypto scams, or any other kind of fraud related to the digital currency sector.
The FTC’s research has revealed that since the beginning of 2021, almost $1 billion has been stolen via crypto fraud.
Rep. Raja Krishnamoorthi stated that the possibility of overnight riches due to rising prices had attracted the attention of both amateur and professional investors alike.
Therefore, it had become the perfect opportunity for scammers to cash in. Scammers prefer using cryptocurrency because there is no central authority that can identify suspicious transactions in different scenarios.
Likewise, the transactions are also irreversible and investors and consumers have limited understanding of the underlying technology, which the scammers exploit.
The crypto exchanges and federal agencies were asked in the letter to give a response by September 12th about what they are doing to ensure consumer protection.
According to the committee, these responses can be used for coming up with legislative solutions. The letters have particularly asked the exchanges to provide documents from January 1st, 2009.
These should disclose their efforts in battling crypto frauds and scams and also show the attempts they have made for identifying, flagging, investigating, or removing fraudulent digital assets, accounts, or transactions.
The documents should also show discussions about the adoption of stricter policies in the same vein.
The committee noted in its letter to the founder and chief executive of FTX, Sam Bankman-Fried, that some exchanges review cryptocurrencies before they are listed, while others do so with no or little evaluation.
Chainalysis, the blockchain analytics company, disclosed that a crypto scheme called ‘rug pulls’ was responsible for 37% of the crypto scams in the previous year.
This scam involves a token getting listed on the exchange, getting pumped by developers, and then disappearing with the money.
The committee also sent an inquiry to Binance.US, which was sued by investors for misleading them into investing in the terraUSD (UST) stablecoin and the LUNA token, which imploded this year.
After the bankruptcy of platforms like Celsius and Voyager Digital, there have also been worries about the security of crypto deposits on centralized platforms.
In these scenarios, customers do not have any guarantee of getting their funds because they have become unsecured creditors.