Senate Crypto Hearings, Binance Withdrawals, FOMC Impact

The Senate Banking Committee is again examining the cryptocurrency industry, Binance withdrawals making headlines once more, and we look at the impact from Wednesday's Federal Reserve rate increase.

Senate Crypto Hearings

A Senate Banking Committee hearing on Wednesday U.S. senators encouraged Congress to regulate cryptocurrency using existing financial rules. This comes as U.S. and global lawmakers attempt to try to control the crypto industry after the collapse in November of the cryptocurrency exchange, FTX and the recent filing of criminal charges against Samuel Bankman-Fried, the FTX founder.

Lawmakers are in broad agreement that crypto industry firms should have greater regulation, but there are many different standpoints on the form any regulation should take.

At the hearing, U.S. Senator Elizabeth Warren, a strong critic of digital currencies and Wall Street hawk, said, “It is time for Congress to make the crypto industry follow the same money-laundering rules as everyone else.” Along with Republican Senator Roger Marshall from Kansas, Senator Elizabeth Warren previously announced legislation targeted at closing loopholes that allows money laundering in the cryptocurrency industry.

Binance Withdrawals

In the aftermath of the collapse of FTX, over one billion US Dollars were withdrawn from the world’s largest cryptocurrency exchange, Binance in just one day, according to Changpeng Zhao, known as CZ, the Binance founder. On Tuesday, CZ tweeted, “We saw some withdrawals today. We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us.” He added, “I actually think it is a good idea to ‘stress test withdrawals’ on each CEX on a rotating basis.”

The recent withdrawals have been compounded by a report from Reuters that highlighted the U.S. Department of Justice investigation into Binance. This is just one of separate probes into the cryptocurrency exchange from global law enforcement agencies. 

FOMC Post Mortem

Cryptocurrencies were broadly lower in the wake of Wednesday's FOMC decision to raise US interest rates by 50bp. Alongside other riskier assets, the crypto market did see gains and then losses before and after the move by the Federal Reserve and after the press conference from the central bank’s chair Jerome Powell. In the press conference and from the Fed statement it appears rate cuts are probably not on the agenda for 2023. Powell said, “Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.”