Consumer watchdogs within the U.S. House of Representatives believe crypto-related fraud is a massive problem.
Rep. Raja Krishnamoorthi—Chair of the Subcommittee on Economic and Consumer Policy of the House Committee on Oversight and Reform—sent letters to the largest crypto exchanges in the U.S. on Tuesday, requesting “information and documents” showing how each company is working to “combat cryptocurrency-related fraud.”
The committee is a part of the U.S. House, which forms Congress along with the U.S. Senate and can introduce and debate bills and other legislative measures, including laws regulating cryptocurrency.
Coinbase, FTX, Binance U.S., Kraken, and KuCoin each received a four-page letter requesting “all documents” related to crypto fraud since 2009—as well as answers to five questions—by September 12.
The letters are virtually identical, each arguing that “cryptocurrencies have become scammers’ favored means of payment as well as their preferred bait for unsuspecting victims.”
“Given the growing popularity of cryptocurrencies both as a form of payment and as an investment, I am concerned by the rapid growth of fraud and consumer abuse,” Krishnamoorthi wrote.
Citing a Federal Trade Commission (FTC) figure, Krishnamoorthi estimates crypto fraud will con victims out of a whopping $1 billion in 2022 alone.
“I am also concerned by the apparent lack of action by cryptocurrency exchanges to protect consumers conducting transactions through their platforms,” he wrote in his letters.
Krishnamoorthi asks Coinbase, "What mechanisms, such as insurance covering fraud or other criminal acts, does Coinbase have in place to ensure that individuals harmed while using your services are recompensed?" He also asks for input on what the federal government could do to help cryptocurrency exchanges combat fraud and scams.
The House Committee also sent similar letters to the U.S. Department of the Treasury, the Commodity Futures Trading Commission, the FTC, and the Securities and Exchange Commission (SEC).
In his correspondence, Krishnamoorthi asks the government agencies for regulatory and policy suggestions as well as their opinions on whether cryptocurrencies should be defined as “commodities, securities, or both.”
While there may have been uncertainty around where the U.S. government stands on crypto, these House Committee letters suggest that the federal government wants to gather evidence quickly and no longer be a bystander in what some consider a largely unregulated industry.
It looks like more U.S. regulation is coming—and Tornado Cash was indeed just the tip of the iceberg.