Washington lawmakers don’t plan to sell cryptocurrency shares despite FTX collapse

The collapse of cryptocurrency exchange FTX has also brought down several other companies and threatened the stability of the digital coin market, but some lawmakers on Capitol Hill are continuing to invest in cryptocurrencies even as they call for stricter regulations.

According to Capitol Trades, a website that tracks stock trading by lawmakers on Capitol Hill, at least nine lawmakers in both the House and Senate in Washington have traded in many different cryptocurrency stocks and assets since last year.

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Another lawmaker, Sen. Tommy Tuberville, a Republican from Alabama, revealed at a Senate Agriculture Committee hearing on FTX on Thursday that he also owns some crypto assets. Tuberville’s most recent disclosure reports reviewed by CNBC this year show no cryptocurrency purchases.

Only one out of ten offices contacted said they sold crypto shares after FTX exploded. Rep. Marie Newman, D-Ill., who until last week lost her bid for re-election and owned cryptocurrency stocks, recently sold digital token stocks as the industry took a hit.

“Congressman Newman’s husband sold his coin-based holdings last week due to the volatile nature of the sector,” Newman’s spokesman Marcus Garza told CNBC in an email.

Congressional records show Garza and her husband previously held positions in multiple cryptocurrency-related stocks and assets, including Coinbase Global, a cryptocurrency trading platform. Newman and her husband recently announced a joint January purchase of Coinbase shares worth between $1,001 and $15,000. Disclosure statements for all MPs only show how much their stock purchases are worth.

Coinbase’s stock price fell more than half a percent early Thursday morning.

Kedric Payne, an ethics attorney at the Campaign Legal Center, said lawmakers who own crypto assets have a conflict of interest in trying to write laws to rein in the industry after the FTX collapse.

“This is yet another example of how even well-intentioned lawmakers can’t escape the perception of corruption when they own individual stocks or cryptocurrency,” Payne said in an email. “Voters likely won’t trust lawmakers who own cryptocurrency to regulate it to their detriment. Reform is inevitable because this conflict of interest isn’t going away.”

He noted that these conflicts could be avoided if Congress passed laws “prohibiting members and their spouses from trading individual stocks.”

Walter Schaub, director of the United States Office of Government Ethics under former presidents Barack Obama and briefly under Donald Trump, said lawmakers should not hold crypto assets as they prepare to write new laws to strengthen oversight of cryptocurrencies. Industry after the FTX scandal.

“At a time when the FTX scandal calls for Congressional oversight and possible reform, it is very strange that members of Congress are investing in cryptocurrency and related companies,” Schaub said. “That’s why Congress should prohibit its members from trading or holding conflicting investments.”

The lack of internal controls and a series of questionable decisions by former CEO Sam Bankman-Fried shine a bright light on lax oversight of the industry. Some lawmakers who own cryptocurrency investments have criticized Congress for not passing legislation that would give financial regulators like the Securities and Exchange Commission more power to regulate the industry.

R-Pa., who is the ranking member of the Senate Banking Committee. Sen. Pat Toomey tweeted after FTX’s collapse last month that “the impact on Americans of today’s bankruptcy filing by @FTX_Official could have been mitigated if there had been a transactional, legally mandated, American regulatory framework for digital assets.” Toomey resigns from Congress and is replaced by Democrat John Fetterman.

Despite calls for clearer regulations, Toomey told CNBC that he has no plans to sell his cryptocurrency investments. According to Toomey’s most recent annual financial disclosure reviewed by CNBC, he and his wife owned between $2,000 and $30,000 between Grayscale Ethereum Trust and Grayscale Bitcoin Trust at the end of last year.

Grayscale Ethereum Trust represents an investment vehicle designed to hold Ethereum assets, a cryptocurrency. Grayscale Bitcoin Trust is an investment vehicle with the purpose of holding Bitcoins.

Toomey told CNBC “HODL” when asked if he plans to sell the crypto fund after the FTX crash. HODL is an abbreviation of “hold on for dear life,” a common phrase used by cryptocurrency investors when they have no plans to sell industrial assets even if prices fall. The price of Grayscale Ethereum Trust is down about five percent. The price of Grayscale Bitcoin Trust fell by almost two percent.

Representatives of almost all other lawmakers who bought shares in the cryptocurrency did not respond to the question of whether their leaders plan to sell digital token assets after the collapse of FTX.

Tuberville’s spokeswoman Ryann DuRant told CNBC in an email that the Alabama lawmaker would continue to disclose “all eligible transactions” but did not respond to specific questions about crypto stocks. “Senators are required to file periodic reports for certain financial securities transactions of $1,000 or more. A senator has and continues to report all qualifying transactions,” DuRant said in response to a list of questions.

Sen. Cynthia Lummis, R-Wyo., owns between $100,001 and $250,000 in Bitcoin, according to her latest financial disclosure. “The Qualified Blind Trust (QBT) is currently awaiting approval by the US Senate Ethics Committee,” according to a report showing Lummis’ assets over the past year.

Lummis is a member of the Senate Banking Committee and Sen. Kirsten Gillibrand, D-N.Y. along with backed legislation that would classify digital assets as commodities, like wheat or oil, and give the Commodity Futures Trading Commission the power to rein in the fledgling industry. Since the collapse of FTX, Lummis said, “it’s time to adjust this space.”

Lummis spokeswoman Abegail Cave told CNBC after the story was published that the Wyoming lawmaker “is a self-proclaimed HODLR and nothing has changed that.” He also noted that Lummis was “working with the Senate Ethics Committee to place his assets, including his Bitcoin holdings, in a blind trust.”

Tuberville, who was a college football coach before moving to Washington, compared the fall of FTX to losing a football game at Thursday’s hearing with Commodity Futures Trading Commission Chairman Rostin Behnam after he rushed to allow the cryptocurrency to retire. He also said that there should be more regulations on crypto.

“After I got beat in the football game and found out the other team wasn’t following the rules, I was reminded to sit in the chair,” Tuberville said. “We screwed it up. You have to have rules.”

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