Lawmakers are watching the fallout from the sudden collapse of crypto company FTX, stunned.
"FTX wasn't just another exchange," according to Sen. Pat Toomey (R-PA), the ranking member of the Senate Banking Committee, whose personal investments include cryptocurrency. "This is different."
But so far, the congressional response has been familiar.
Lawmakers have issued short statements, and the relevant committees, including the House Financial Services Committee, the Senate Banking Committee, and the Senate Agriculture Committee, have promised to hold hearings. But there is still no clear path to comprehensive crypto legislation.
In an interview, Toomey faulted his colleagues for failing to do more.
"I think the inaction of congress, and the inconsistency and confusion of regulators, has contributed to this problem," he said.
New uses for old laws
Thousands of FTX's customers are desperately trying to recover money that may be gone for good and the whole world is anxious to contain any damage from the multi-tentacled crypto exchange's bankruptcy.
As lawmakers debate how to respond, regulators and law enforcement agencies have started investigations into the company, once valued at tens of billions of dollars.
The new CEO of FTX has fielded "numerous inquiries" from the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and federal prosecutors, according to a court filing.
But when it comes to digital assets, including cryptocurrencies, bureaucrats are locked in a turf war over who is responsible for overseeing what.
The CFTC, top cop for the multi-trillion-dollar derivatives market, argues it should regulate bitcoin.
The SEC claims most cryptocurrencies are securities, like stocks, and they should be subject to the same rules. Its chair, Gary Gensler, wants companies to provide investors with more information, and to be more up front about the riskiness of digital assets.
On Monday, the Senate Agriculture Committee's chair and ranking member, Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR) announced a hearing: "Why Congress Needs to Act: Lessons Learned from the FTX Collapse," with CFTC Chair Rostin Behnam.
The two senators are among the sponsors of a bill called the "Digital Commodities Consumer Protection Act," which would allocate more regulatory responsibility to the CFTC. Notably, Bankman-Fried supported the legislation.
Absent new legislation, regulators have been leaning on existing laws, many of which pre-date the advent of crypto, hoping that will keep contagion from spreading.
During an on-stage interview at a conference recently, Behnam said his agency has the tools it needs to ensure crypto companies registered with his agency comply with its rules and regulations.
"We will use that authority to the full extent of the law," he promised.
But many individuals and companies haven't registered with the government, even though regulators have encouraged them to do so.
Throughout his tenure at the SEC, Gensler has told the crypto industry his door is open, and he and his colleagues are happy to talk about regulations that are in place. Bankman-Fried met with Gensler twice in the past, according to the chair's official calendar.
With the White House's encouragement, the SEC and the CFTC have doubled down on enforcement against bad actors in crypto in recent years. Both are able to bring charges, and they can levy fines and other penalties.
But more enforcement requires more resources, regulators say. So, Benham and Gensler are not just asking congress for more clarity about their regulatory responsibilities when it comes to crypto — they also want bigger budgets.
"You know, it's awful, and simultaneously, not all that surprising," said Senator Cynthia Lummis (R-WY), who chairs the Financial Innovation Caucus, addressed FTX's collapse at last week's banking committee hearing.
Lummis, who owns bitcoin, introduced a bill with Sen. Kirsten Gillibrand (D-NY) in June, which was a comprehensive framework for regulating cryptocurrencies and other digital assets.
But its future remains uncertain. That legislation hasn't made it to the Senate floor for a vote.