Miles Jennings, Head of Crypto Policy at Andreessen Horowitz (a16z), said that nearly four years after the collapse of FTX, the US Congress has failed to create a comprehensive cryptocurrency regulatory framework to prevent similar fraud cases. Jennings called on the Senate to advance the CLARITY Act, warning that if the current situation continues, the next major crisis in the cryptocurrency market could have far broader consequences than the FTX incident.
According to Jennings, the root cause of FTX’s collapse lay not in complex financial products, but rather in the misuse of customer assets and the absence of fundamental safeguards such as independent custody, separation of customer assets from company funds, disclosure obligations, and regulatory oversight. He noted that the CLARITY Act aims to bring many of the safeguards already used in traditional financial markets to the crypto sector by placing digital asset intermediaries, dealers, and exchanges within a regulatory framework.
The bill proposes implementing regulations such as the unbundling of customer assets, qualified custody services, limiting conflicts of interest with related parties, mandatory disclosures, listing standards, and restrictions on insider token sales.
Jennings also countered criticisms that the Clarity Act signifies “deregulation in the crypto sector,” arguing that current US legislation does not clearly define which regulatory category numerous digital assets fall into. According to Jennings, this legal ambiguity has been one of the factors that has allowed platforms operating outside the US, such as FTX, to grow.
Jennings, also addressing ethical issues in the crypto sector and objections regarding stablecoin yields, said the new regulation limits passive stablecoin yields and authorizes the U.S. Treasury Department to take additional measures if evidence of capital outflows emerges.
Jennings also added that the total supply of stablecoins has exceeded $300 billion, and the size of tokenized assets has surpassed $30 billion. Noting that major financial institutions such as BlackRock, Fidelity, Franklin Templeton, and Goldman Sachs are also investing in the digital asset space, Jennings stated that the crypto market can no longer be considered a small sector relegated to the margins of the financial system.
Jennings argued that instead of the US cryptocurrency policies being reshaped by the executive branch’s decisions with every change of administration, they should be governed by long-term and stable rules established by Congress, and reminded that the Senate will vote on September 15 on whether or not to begin deliberations on the CLARITY Act.
Jennings stated, “If we don’t act now, the next crisis could be much bigger.”
*This is not investment advice.
