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Citing the implosion of FTX, US lawmakers on Tuesday expressed concern about the risks posed to retail investors and the broader financial system, and stepped up their calls for more stringent oversight of cryptocurrencies at a hearing with the country’s top banking regulators.

“This should be a renewed call for Congress to take a serious look at crypto exchanges and lending platforms, many of which engage in risky behaviors, while marketing themselves as safe for consumers,” Bob Menendez, the Democrat senator from New Jersey told his colleagues and banking regulators, which included the Federal Reserve’s vice chair for supervision, Michael Barr, and the acting head of the Comptroller of the Currency, Michael Hsu.

Cynthia Lummis — the Republican senator from Wyoming, who has co-written a bipartisan bill that sketches out a complete regulatory framework for digital assets in the US — described the FTX turbulence as “awful and simultaneously not all that surprising”.

“It’s obvious that Congress needs to regulate digital assets,” she added.

Patrick Toomey, the top Republican on the committee, slammed the regulators focusing on issues that he said were outside of their mandates, including climate-related financial risks, and in turn failing to provide the necessary guidance for banks about crypto activities.

“While some of our banking regulators have been distracted, they’ve failed to address the real challenges facing the financial system,” he said. “The ambivalence of the remaining agencies has helped to push crypto activities into foreign jurisdictions with weaker or no regulatory regimes.”

On Tuesday, Barr warned of the potential for “systemic risk” should “interlinkages develop” between the crypto system and more traditional corners of the finance.

“When regulation is lax or behind the curve, it can facilitate risk taking and a race to the bottom that puts consumers, businesses and the economy in danger and discredits new products and services with consumers and investors,” he said.

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